The principle of lifecycles applies to products and services, but equally to the markets that are served and the business processes involved in satisfying customer demand, says Nicholas Watkis.
It is generally accepted that product and services have a 'lifecycle'. From the time a product or service is launched into a market, it will grow with increasing sales, before entering a period of 'maturity' as its market becomes 'saturated', after which sales start to decline as demand decreases and competitive products arrive.
Product lifecycles can be long or short. Some 'fashionable' products may only last for a matter of weeks or months, while others may last for decades. But what is certain is that demand for any product or service is finite and at sometime or other demand for the product will be replaced by different requirement.
For the manager responsible for getting and retaining profitable income for a business, awareness of product lifecycles is very important. An appreciation of where a product or service may be, in relation to its lifecycle, is essential for future business planning. Can the product or service be modified to extend its life, or is it becoming obsolete owing to changing conditions or competitive technology?
Businesses exist only to make money. Making products or supplying services is only the manner in which a business produces its income. Being alert to changes in customer demand is of primary importance for the manager of income development. Internal business indicators may help to illuminate the position of a product in relation to its market, but declining sales figures can be indicative not only of a possible reduction in demand, but also of other factors including organizational inefficiencies.
While internal indicators show how the product is reacting to the market, external indicators show how the market is reacting to the product. By comparing trends in sales with those of market growth and market share, it is possible to assess whether demand for a product is increasing, maturing or is in decline. Changes in the economic climate at local, national and international level can often have direct effect on the demand for specific products and services. Proposed and actual changes in legislation may affect the nature and substance of products and services, or impinge directly on how they are delivered. Similarly, being aware of how trends in consumer fashion may ultimately affect demand, especially with fast moving consumer goods. An advance in technology may make a product obsolete overnight.
The principle of lifecycles
Changes in customer demand may be slow and subtle, or may be quick and direct, but for a business to be and remain successful; it needs to anticipate change before it happens. In whatever business an organisation is involved, customer demand will always be evolving as needs and perceptions change. For the manager this means that looking ahead is essential, in order to be suitably prepared either to modify the product or service to meet changing needs and expectations, or to develop new products or services to be the solution to different problems.
Getting and retaining business requires many processes and actions in order to maintain the flow of necessary income. But as the economic, social, and market conditions continually change and develop, so the method by which business is secured may become less suited or inefficient to meet the prevailing commercial climate. The principle of 'lifecycles' does not only apply to the product or service that produces the income, but also applies to the processes involved in getting and retaining business.
How effective is the organisation in getting business? How efficient is it in producing income? What is certain, is that in a changing world of commerce, the processes and methods used successfully yesterday, although tried and trusted, may not be as effective under today’s conditions. It is important therefore, that managers should regularly examine and question their methods and processes, to ensure that they are efficient and effective.
Are the ways that are used to seek and engage customers still as effective as previously? How do you know? If the results are less than they were despite the same investment of effort, perhaps they need to be modified or adapted to meet changed conditions. Alternatively, perhaps new methods and processes need to be employed in order to develop and maintain business. Only constant monitoring and analysis of quantified business performance indicators from both internal and external sources will enable business performance and income to be maintained and maximised.
The principle of lifecycles applies to products and services, but equally to the markets that are served and the business processes involved in satisfying customer demand.
Nicholas Watkis is the founder of Contract Marketing Service, established in 1981. He is a fellow of the Chartered Institute of Marketing and a certified management consultant of the Institute of Business Consultancy. For more articles from Nicholas, click here.