Establishing a solid customer base and a high product demand are great achievements to any business. They are healthy signs of success and they build confidence among investors. However, there are several issues that can lead to low product demands even for products that were previously under high demand. Failure to adapt to dynamic market conditions, develop effective customer retention techniques, poor management, lack of expertise and ineffective marketing are issues that can lead to low product demands.
Yahoo.Inc is an example of a company whose range of products and services has faced a serious decline in demand over the years. In the 1990s, yahoo was one of the biggest online companies globally. By mid 2000s, the company was on a serious decline. In the early 2000s, the way in which people interacted with the internet started changing. The internet evolved into a two way contributory channel from the one way information dissemination channel it had been. Social networking and blogging took off. Lack of offerings in these new areas caused yahoo to lack relevance to many of its users. Yahoo’s down ward spiral begun at this point because it failed to adapt itself to changes in a dynamic market. Companies like Google that launched blogging and social networking platforms survived.
Poor management and wrong decision making is another reason why product demands decline. Pay by Touch is a company that sought to revolutionize how people pay money globally. The company’s founder John P. Rogers was a business man with solid business sense, a great idea and legendary pitch. Investors listened to him and by 2007 the company had amassed 340 million dollars in funding. A year later the company collapsed and filed for bankruptcy. The major reason was that Rogers started spending over 150 million dollars in buying out his competitors and 8 million dollars a month on drug induced spending sprees. He threw outrageous parties and even offered drugs to coworkers! In business, the right management is better than the best business idea.
Webvan was a company in the online grocery market. It was launched in 1999 by Louis Borders. Webvan’s stock was valued at around 1.2 billion dollars at its peak. It made a lot of money by delivering groceries to customer’s homes. It signed a contract worth 1 billion dollars with Bechtel to build around 26 warehouses in various states. The company collapsed a few years later. It was later observed that no one in the company’s C-suite had ever been in the supermarket business. Lack of expertise was the major reason that led to the collapse of Webvan.
References:
Netessine, S., & Tang, C. S. (2009). Consumer-driven demand and operations management models: A systematic study of information-technology-enabled sales mechanisms. New York, NY: Springer.
Glass, R. L. (1999). Computing calamities: Lessons learned from products, projects and companies that failed. Upper Saddler River, NJ [u.a.: Prentice Hall.
Carroll, P., & Mui, C. (2008). Billion dollar lessons: What you can learn from the most inexcusable business failures of the last twenty-five years. New York: Portfolio.
