Five Value-Adding Opportunities during the Declining Phrase
Today, I’m looking at value adding opportunities for the Declining phases of a company life cycle. This could also be applied to a company’s product or service life cycle. This information is provided to assist sales people deal with their customer’s situations and internal managers looking for ways to improve the performance of their company.
The Declining Phrase of product life cycles is one of the most difficult phrases for companies and the individuals within these companies to handle. Usually there are emotional links to these products and decisions are influenced by this emotional attachment. Emotional issues need to be overcome and some business logic applied to the solutions needed. Yet, companies that have only declining products are usually in survival mode and their choices are limited at best. The best companies have launched new products during the growth and maturity phrases and have new products becoming maturity products at this time.
So what can you do if the company or products for your company or the customer’s company to add significant value during this declining phrase? Here are five things we have found to provide the value added opportunities:
1. The need to control variable costs has moved to the top of the list regarding things to do. Unit costs must be reduced during this phrase since everyone is selling on the cheap. Anything that can lower the variable costs of products will be received with acclaim and recognition.
2. Increasing Market Share is the goal of the Sales & Marketing teams. Increasing sales is the major tactic and buying market share from others is the name of the game. In fact, when companies fall into the declining market phrase – this is the prime time for mergers and buying other companies or divisions of companies. This activity is an exercise for increasing market share, customer base and capturing major accounts. This increased size allows for more efficiency and effectiveness with the combined companies. This merging of companies allows for cost cutting by eliminating duplication of effort.
3. Marketing departments need to focus upon differentiating products and services from competitors. This allows for increased sales or improved brand recognition by customers and markets. Improved market niche penetration maintains higher margins for older products and helps the cash flow.
4. Increasing productivity is another area of focus. Productivity increases keep a product in play for a longer period of time. If cost controls are ignored, then the product becomes a loss leader and really is headed for the junk pile – plant closings – and job cuts. The fact that companies with major product lines in the declining phrase are the ones that headed for bankruptcy in today’s market. The economy offers no free rides for products today.
5. Closely related to increasing productivity is Decreasing Cost of Sales. If the company is doing a good job with points one and four – then the success of decreasing cost of sales is improved. However, during this phrase not only are the product cost being improved – it’s the selling expenses that really get examined. Companies begin to look for ways to cut direct sales people and expand the third party or agency sales. There is an increase in the use of e-commerce on the Internet. The use of affiliate relations are used to increase e-commerce sales – meaning other people talking about a product or service with their customers which drive hits to the companies e-commerce site.
The reason I have spent time discussing the four phrases of business product life-cycles is for you to take this information and use it for either consultative selling projects or internal profit-improvement projects throughout the company AND the various life cycles. One thing I have learned from both selling products and services and advising my clients on tactics to improve their business is: Life-cycles are always at work. They go through the phrases and it is impossible to move a product back in time! That’s fool thinking. Study the product life cycles and how they work. Learn to know what to emphasize during each phrase – it will help you to be a success.