The Downside of Cost Cutting

On Friday, my mom returned from a trip to Shoppers’ Drug Mart with a new bottle of moisturizer, a $20 expenditure.  Taking a closer look at the package, she found the product expiry date on the bottom of the package.  The product expired in four weeks.

So, she went to the store to exchange it for one with a longer shelf life. The clerk told her that the company producing this moisturizer had changed their sales force from a travelling force who actually went into stores, to an order desk.  As a result, no one was checking products.  For the moment, let’s set aside the question of why the drug store staff weren’t regularly managing product on the shelf.

Let’s look at the advantages and disadvantages of the change that the manufacturer has made.  Upside? Clearly cost cutting.  Order-taking is a less expensive proposition that a traditional retail sales force.  The downsides are a little less obvious, but may cost more in the long-term. First, you end up with out of date product on the shelves, resulting in either customers having to return product, or in product that is ineffective.  Either way, you erode the brand. Secondly, because no one from the company is in the retail environment regularly, the company loses an important source of information about both customers and the end consumer.

Marketing is becoming more and more about interactive relationships. Using social media is one way to develop these relationships. But face to face relationships the “old school” way can add different information to the mix. Understanding the shopping experience from the customer and consumer perspective in real conditions is becoming a more important part of the marketing mix.

When cost cutting, be careful.  You might accidentally also cut your brand.


Categories: Branding, Marketing

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2 replies »

  1. Interesting, Colleen.
    Might we also apply this to distance (i.e., online) education rather than the traditional classroom? Cost cutting, check. Eroded instructor – student relationship, check.
    But maybe in this case, there are some advantages for students. People who work unpredictable shifts and stay-at-home moms are two groups I can think of who might need courses delivered online.
    I don’t see much in the way of advantages for the consumer with an order desk system of supply, though. Maybe a lower price if the manufacturer passes the cost savings on to the consumer? Why do I suspect they don’t do that, though….

    • I hadn’t thought of the distance education comparison, but now that you mention it, I do think it could potentially have a negative relationship impact. However, some students are willing to trade off relationship for convenience. I guess as long as we’re aware of the trade offs, these costs reductions are okay. But, as you point out, when the cost reduction provides nothing of value for one party, then it might be a mistake.

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