The Wall Street Journal has an article today about 3M's efforts to "tweak" its products so as to reduce costs. Undoubtedly, some of these types of efforts make sense, as companies try to compete against efficient rivals, and as they attempt to make their products affordable in a rough economy. However, such "tweaking" efforts come with substantial risk, particularly for firms that have strong brand equity that warrants protection. As John Foraker, CEO of Annie's, mentioned at his talk at Bryant University the other day, many companies develop great products and then spend the next couple years ruining the products... because they reduce the quality of the inputs in an effort to trim costs.
As firms engage in this cost reduction efforts, they must ask themselves repeatedly:
1. How will these "tweaks" affect our brand equity?
2. Will we attract new value-oriented customers at the expense of reducing satisfaction among our current customers?
3. Do we run the risk of encountering serious product quality issues as we change our product inputs?