Retailers from all industry sectors have faced some embarrassing and sometimes very public product flops. Almost everyone who was alive during the ‘80s, for instance, remembers the failure that was New Coke along with the death of the Sony Betamax recorder. Before companies sink too much money into investments that aren’t working, they need to know when to activate the escape hatch. Sometimes, the way that companies pull out of bad investments will deliver a much-needed and surprising boost.
Look Forward, Not Backward
Management accountants have a concept called “sunk cost.” Sunk costs relate to the cash that companies have invested in a business segment that they can never recover. Instead of looking backward at how much money has already been lost in terms of sunk cost, look to the future and compare the cost of continuation to the cost of extraction. If extracting the company from the failed investment costs less than sticking with the investment, then extraction is the only logical option.
Aggressively Break the Silence
When a product line or investment fails, customers want to know that the company has listened to their complaints. British Airways, for instance, has installed video booths near baggage claim areas in Heathrow Airport so that customers can easily voice their complaints about the airline’s services when complaints are fresh on their minds. However, companies should be careful not to instigate customer surveys or other “voice of the customer” initiatives if they are not prepared to act on them. Making product failure public and then failing to address it effectively can have disastrous consequences.
Take Charge of the Conversation
If you look at the Coca-Cola website today, you will notice that the brand has entirely reframed the events surrounding the uproar generated by New Coke. The good news for Coca-Cola is that, in the end, the temporary introduction of New Coke reminded people of their bond with their favorite soft drink. After reintroducing Coca-Cola Classic, the Coca-Cola brand received a significant boost, thanks to its attentiveness to customers and knowing when to let go of a bad idea.