Customer Decisions on Benefits


Reasons for Negative Volatility

Capsule: You should pursue several avenues to understand why the Company loses sales volume in the market place. This sales volume is very expensive to recover once lost. The reasons for this negative volatility are likely to get worse without your attention in your efforts to improve current products and services.

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Symptoms and Implications:

The reasons that customers demand more than one supplier in their relationships reflect some industry-wide failures, usually in product availability or in pricing. The customer has developed a mistrust of the entire industry. But volatility goes beyond an industry failure. It brings customer-buying decisions and supplier failures to the level of the individual supplier performance.

Negative volatility is commonly the result of bad performance. It should not happen. Once a customer buys from you, inertia sets in. They would really rather not leave you for another supplier. They know your Company and its products better than they know your competition. Once you have “failed” the customer, though, inertia works like the alligator’s tail. It swings the other way. Then, the customer would rather not purchase from you again. The Company should understand the reasons for the industry’s, and its own, negative volatility. Your product and service improvement program should eliminate as many of these reasons as you can.

In each of the questions to follow, the Company has a choice on the depth of its analysis. You may develop an understanding of negative volatility at the level of the total industry, at the level of the company as a whole, by the causes of volatility for the Company and by its forms. The understanding of the reasons for the Company’s negative volatility is developed further in the questions below.

In the following questions, you also develop an understanding of the Company’s specific failings leading to negative volatility. You can conduct this analysis of the company at more than one level. You may separate the Company’s total negative volatility into the volatility caused by your own “failure” as opposed to a competitor’s “win.” You may also pursue the causes of negative volatility into its two forms, Get Out and Decrease Use. The larger the market the more valuable are the answers to the more detailed questions. The Company may choose to answer in less detail if time or resources are limited.

Reasons for Negative Volatility: Industry Examples»

Reasons for Negative Volatility Questions

Analysis 34:
Reasons for Company Negative Volatility

Analysis 35:
Using “Win” and “Fail” Data to Help Develop a Performance Innovation Program

Analysis 37:
Share Sources and Beneficiaries

Not all reasons for volatility are equally important. A reason for volatility is important only to the extent of the sales volume that it means for the Company. You may rank each reason for volatility in an order determined by the total sales volume change that the reason might represent.

  • What are the reasons, ranked in order of importance, for the Company’s total negative volatility? Analysis 34 and 35

  • What are the reasons, ranked in order of importance, for the negative volatility the Company suffers due to another competitor’s “win?

    1. In the Company’s total negative volatility
    2. In the Company’s Get Out volatility
    3. In the Company’s Decrease Use volatility
  • What are the reasons, ranked in order of importance, that the Company “fails” its customers?
    1. In the Company’s total negative volatility
    2. In the Company’s Get Out volatility
    3. In the Company’s Decrease Use volatility

As part of the review of visible volatility the Company might analyze who gains and loses net volume in direct competition with the Company. This analysis hints at areas of benefit differences to explore that might have escaped your notice.

  • What competitors does the Company gain volume from, and lose volume to, in the market? Analysis 37

  • What specific reasons cause the Company’s negative volatility volume shift to each of the competitors?

Basic Strategy Guide Users Return To: Step 13

Summary PointsNext: Hidden Negative Volatility