Product Life Cycle


Once the market has emerged and a firm has decided to enter, it must still contend with uncertinities in the products in the market. The marketing literature offers a parallel to the technology life cycle: the product life cycle. A product has four predictable stages with distinctive characteristics, marketing objectives, and strategies. The introduction stage starts when the new product is launched. Sales are low, costs per customer are high, profits are negative, customers are largely lead users, and competitors are few. In the growth stage, sales rise rapidly, costs per customer start to drop, profits start rising, and the number of customers also increases. In the maturity stage, sales peak, costs per customer are low, profits are high, and the number of competitors is stable. In the decline stage, sales start to decline, costs per customer increase, profits arte declining, and the number of compititors is also declining. These characteristics call for specific strategies. For example, in the introduction stage, a firm’s objective is to create product awareness, and product strategy is to offer a basic product. The demand in each market is fulfilled by a seriies of different generations of products, with the first one introduced at the emergence of the market.

 

The main drawback in using the product life cycle to reduce uncertainty is that number of stages and duration of each vary from product to product. It is also difficult to tell when a stage starts and ends. In any case, they provide some regularities to help a firm know when and what to invest in an innovation.

 

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Creating and Consuming Knowledge


There are far too many passive consumers of other peoples’ knowledge, and unimaginative users of standard tools. To ensure relevance, individuals and teams should be encouraged to develop their own approaches and understanding. Innovators and market leaders move beyond what is generally known or assumed. They voyage into the unknown, discover new knowledge and create additional competencies relevant to the achievement of their entrepreneurial visions.

 

Learning is dynamic. It is concerned with flows, processes for creating new knowledge. In many companies there is an imbalance between the consumption and development of knowledge. People simply draw down an existing supply without replenishing the well. The value of knowledge can rapidly diminish if it is not developed and kept current and relevant.

 

Winners champion knowledge and sharing. Their balanced scorecard assessments embrace learning, intellectual capital issues, and whether knowledge is being appropriately valued and effectively exploited.

 

Ultimately, a company and its people must outlearn competitors. Effective and collaborative learning can require creative combinations of complimentary approaches, environments, processes and technologies.

 

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight

Usage Analysis and Customer Retention


Segmenting markets by consumption patterns can be quite insightful for understanding your customer mix. Differentiated marketing strategies are needed for the various user groups—first-time users, repeat customers, heavy users, and former users. By classifying customer accounts based on usage frequency and variety, companies can develop effective strategies to retain and upgrade customers. There are many highly informative, low-cost applications of usage analysis that should be considered by management.

By classifying customers into usage categories, management can design appropriate strategies for each market segment. The objective is to move customers up the ladder, where possible. The implication of usage analysis is that all customers are not equal; some (the heavy users) are clearly more important than other categories.

The Pareto principle, or 80/20 rule, is insightful in the context. In a typical business, approximately 80% of sales comes from about 20% of customers (also, note that generally about 80% of your sales comes from 20% of your goods or services). It is important to defend this core business, as heavy users are primary attraction targets to key competitors. These highly valued customers require frequent advertising, promotions, and sales calls and ongoing communication efforts.

By knowing who better customers are—through geographic, demographic, psychographic, and benefit research—we have a solid profile of “typical users.” This information is very helpful in playing subsequent customer attraction/conquest marketing efforts. Realize that the marketing information system, the database, plays a key role in customer analysis and decision making.

For unprofitable customers, the company often needs to find new ways to serve them more effectively. Technology such as ATM machines, ICT, can be used in this regard. Quarterly contact through a newsletter and direct mail or access options such as toll-free telephone numbers and websites maintain adequate communication with low-volume users. In some cases, it may even be desirable to sever the relationship with certain unprofitable customers.

A good understanding of our customers’ purchasing patterns helps us keep our customers and gain a larger share of their business. Share of customer (customer retention focus) has supplanted market share (customer attraction focus) as a relevant business performance dimension in many markets. Share of customer is adapted by industry and goes by such names as share of care (health care), share of stomach (fast food), and share of wallet (financial services). If a company can increase a customer’s share of business from 20 to 30 percent, this will have a dramatic impact on market share and profitability.

Recency, frequency, and monetary value (RFM) analysis is a helpful tool in evaluation customer usage and loyalty patterns. Recency refers to the last service encounter/transaction, frequency assesses how often these customer-company experiences occur, and monetary value probes the amount that is spent, invested, or committed by customers for the firm’s products and services.

A more effective strategy is to classify customers via usage analysis and design differentiated marketing approaches for each target market. In sum, usage analysis can greatly assist us in our customer retention activities. Think about how to “hold” heavy users and key accounts, upgrade light and medium users, build customer loyalty, understand buying motives to meet or exceed expectations, use appropriate selling strategies for each targeted usage group, win back “lost” customers, and learn why nonusers are not responding to your value proposition.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com