An industrial equipment supplier was concerned that one of its core products was being threatened by a potential substitute that served the same markets but utilized different design. Many of the client’s largest customers were using both the client’s product and the alternative product.
The client was considering whether to add the substitute product to their portfolio. To address this decision, the Client turned to RSR Marketing Solutions (“RSR”) for assistance in gaining a fact-based assessment of the market and competitive landscape for the substitute product line. In particular, they wanted a clearer understanding of:
- The total and available market size for the core product and the substitute product, and the relative growth rates for these products
- End user demand for the substitute product line – who is buying the alternate product, how is their purchasing mix changing, who are their preferred suppliers, and why?
- To what extent would the client be cannibalizing sales of their core product if they added the substitute product to their portfolio?
If they do expand their product portfolio, should the new product be developed internally, or should the Client engage in a brand label agreement or strategic channel partnership?
Overview of RSR Engagement
RSR Approach
Market Analysis
- Determine market size and growth by key segment for both products in question.
- Assess positioning, strengths, vulnerabilities and likely reaction of leading competitors
- Identify potential partnerships or alliances that might offer the best risk-adjusted ROI.
Customer / Competitor Analysis
- Understand customer perceptions and buying behavior for the potential substitute product relative to the Client’s current product line.
- Evaluate buying behavior by key segment, to understand the degree to which the two products compete directly versus where they may be complementary
Results
Key Study Findings
- Determined that the market for the potential substitute product was larger than expected. This finding helped justify the Client’s investment to expand its product portfolio.
- Found that a single competitor was dominating the market, but that customers generally wanted to have more than one supplier to reduce risk.
- Identified two potential partners that had strong engineering and manufacturing, but needed the client’s marketing and distribution strengths.
RSR Recommendations
- Suggested market entry through a distribution arrangement instead of new product development, given the Client’s sales and marketing strengths in the business.
- Identified an unexpectedly large segment of the market that the client was not serving with its existing core product, but which the new product was well suited to serve.
- Screened potential partners and recommended which one offered the best prospects.
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