Why do innovative products lose market outlets?

Day by day, innovative products break into the global market. Day by day, its analogues and copies appear. If a manufacturer fails to capture a market share at once, its products may fall into oblivion. Is a distributor the one to blame? Definitely not. Besides an innovative product, a demand for it is the mandatory condition. If a manufacturer sticks to its own marketing strategy without considering the influence it exerts on its partners, it will definitely fail to successfully arrange the sales process.
In 2011, a small series of signal relays attracted my attention. Their main advantages include tiny sizes, enhanced insulation parameters, and speed characteristics. Relays are used for communication systems and telecommunications, in office and medical equipment, in automation field and signal systems, in checkout equipment and low-power interface circuits, as well as consumer electronics.
The relay series comply with prevailing manufacturing standards and are characterized by excellent electrical parameters, high reliability, and competitive cost.
After a decision on strategic development of this series had been taken, a big job was done: an article written and some news were written, banners were posted, and the series was included in the warehouse printed catalog. We produced active efforts on implementing the series into customer projects. These efforts resulted in the sales volume doubling over two years and the number of customers increasing four times over the same period. And not only here by us, but on the whole market.
Our team was extremely satisfied with the result. But unfortunately, the manufacturer decided to move the factory to a new location. The relocation time took longer, which resulted in production time increasing sharply and the finished products distribution queue being disrupted. This undermined its market promotion greatly, and the whole campaign war stopped. It was unreasonable to offer products with an official delivery time of 300 days to the customers.
There were no sales for a year and a half, but by the early 2016 the manufacturing situation looked up and in 2017 we had a record number of customers (thanks to the previous promotion campaign), who used the series for manufacturing or purchased testing samples. It looked like things were getting better.
At first, we felt no consequences of a new failure. We had sufficient stocks, placed orders that were duly shipped, and the series was offered on free market. The supplier didn’t inform us about the breach of agreement, as it had done before. But early in 2018, the situation deteriorated sharply in just a month.
According to the author of the article, an extremely large-scale customer appeared who purchased almost all the manufactured products. To the rest of the companies, products were shipped by a leftover principle.
If early in 2018, it was still possible to repurchase a certain position somewhere, from the midyear 2018 the manufacturer ceased shipping the series.
That’s the difference between the first and the second supply failures. Before, the manufacturer used to ship only few products for the projects; however, in the second case it ceased shipments at all despite our requests.
At the time of writing this article, the orders dated 2017 haven’t been shipped yet, and the orders made in 2018 have been shifted to mid-2020 without guarantees of shipments. All this resulted in the number of customers reducing four times. Many of them switched to alternative offers and all our achievements in promoting the products withered away.
Let’s resort to the FEA database to check whether these statements are correct. There are no prices and names in the database, but the manufacturer’s website states that the series is produced at a Portugese plant. We will base on this fact. Below, you can find the import of TE relays; HS code: 8536490000 (see the table).

Table. Relay ТЕ import

Due to the fact that any shortage triggers a sharp increase in prices, you should ignore the customs value. It’s better to check the weight. At the same time, you should keep in mind that in 2016 orders were shipped that had been made under conditions of delivery time and volume violations. Any failure always results in a certain overstockage. First of all, this overstockage is faced by those who managed to notice manufacturing problems on time. Then, an overstockage occurs when manufacturing time start to decrease. However, supply disruption affects different customers at different times, since the manufacturer never notifies about the easing of situation in advance. Thus, you can purchase a lot hoping to sell it at a higher price, but in two or three months you’ll find out that supply and demand have equaled out.
Despite the fact that this relay series is still the best one on the market in terms of price, quality and size, it has already been discredited in the community of engineers, developers, distributors and suppliers. At the moment, absolutely no one right minded will suggest using it or assign it to a project.
Other products that were to become extremely viable and in 2011 were the market innovation, failed to break into the market due to price considerations only. These are connectors for 2–4-contact cables. Such type of a compact connector is an item made of transparent high-quality thermoplastic with helium filling. A sealed connection is activated by pressing the structure’s fixing elements.
Manufacturers of lighting equipment were extremely interested in these connectors. In five projects out of six, customers were ready to purchase them, but not at a price of $1. At the same time, the connectors manufacturer refused to reduce the price. As a result, customers decided on a cheaper option. Given that the products were manufactured at a Chinese factory, its final price of $1 was several times too high for final consumers. Nowadays, the manufacturer has no more chances to capture a market share, despite the fact that within two years more than 60 customers purchased and tested these products through our company, with the half of them being satisfied with the technical solution.
There are dozens of such cases, when innovative products don’t manage to secure their foothold in the market after being introduced due to various factors.
Many manufacturers stick to the principle “let’s introduce a new product first and then we’ll see”. They prepare no promotional materials, don’t motivate distributors to hold marketing campaigns, establish no feedback and work out no pricing policies. Such manufacturers include all expenses into the first year’s sales, which results in an overestimated product price. They aren’t even ready to sell the first shipments at a minimum margin in order to increase sales, jack up production volumes and reduce future production costs.
In general, in my experience I haven’t seen a single electronic components brand that would coordinate the marketing efforts of various distributors and focus their attention on certain products. Indeed, it’s so easy to develop, create and certainly control advertising campaigns together with partners by organizing releases of articles, banners, modules, news, catalogs, product samples, as well as sales calls.
Whoever sells the products, they should always conduct promotion campaigns, notwithstanding the sales decline or increase. If a manufacturer has chosen a certain item or a whole product series and decided to focus promotion efforts on it, it should take joined actions with all distributors. Even if each of them has its own approach to product promotion. If this is about warehouse distributors, then the products should be placed to the warehouse and the manufacturer should take all appropriate measures, including informational support and parametric search implementation. In the case of project distributors, the manufacturer should establish a program of sales calls and product implementation. Once I was to make a comparative study of warehouse distributors’ promotion activities of the same brand: one of them published eight news and articles within a year’s time, another one – three news, and the other two did nothing of a kind. I strongly convinced that a decent representative shouldn’t be just a neutral intermediary. And when I talk about joint actions, I don’t mean that the representative should just direct and coordinate distributors, going with the stream itself. No, it should receive general quotas, offer more attractive prices for the selected series, try to reduce production time, and take all the steps aimed at increasing sales.

I would like to share one observation regarding advertising companies. We always ask manufacturers to send articles about their products, which can be translated and published. No one has sent yet. We ask to send any of other authors’ articles with permission for translation and publication. No one has sent yet. At the most, they send news from the website or a banner. It’s so strange – do all manufacturers reinvent the wheel? Why don’t they collect articles? It’s so simple: if an article is written in Russia, Poland, or Japan, the manufacturer can buy out the rights to it or pay 50% of the costs, and then send for publication to every country.
I had an occasion to develop a couple of brands that required to send them all advertising materials and articles for review, but when we asked them for these materials, they replied that they had nothing. That’s the paradox.
In general, marketing control and globalization is convenient, functional, saves a lot of time and serves common goals, and what’s more important, a manufacturer can carry out global promotion campaigns for its new products, which will definitely make it possible to boost sales and production volumes in the shortest time possible. It will result in a reduced payback period.
Even from a distributor’s point of view, it is a right joint decision. The product is the same, but one distributor writes three articles per quarter and another one – a single article once in a year.
I am sure that a manufacturer that will learn to join and consolidate efforts of dozens of its distributors of the most promising products will receive a huge bonus.
Anyway, a lack of global or any other kind of marketing promotion is another reason why sales of unique products may fail.

The article was published in “Electronic components” magazine