Six Value-Adding Opportunities in the Maturity Phrase of Lifecycles
Today, I’m looking at value adding opportunities for the Maturity 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 Maturity Phrase is an interesting period and seems to have a large number of companies in this category. However, most of these companies are in commodity industries and are working hard to stay out of the declining phrase – which I will discuss on Thursday.
There are six opportunities for you to consider when you have identified a company or product in the maturity phrase. The six that we have assisted our clients with include:
1. Maximize Sales Volume. This is a no-brainer yet some people seem to look for other things to work on. The fact is that when you are in the maturity phrase volume is the key to increasing cash since profit margins are shrinking. Any method to increase sales is important here – promotions, special discounts, new sales channels, automated sales (Internet) and sales motivation or incentive plans.
2. Look at multiplying the number of products in a brand. Expansion of the family of products can increase sales to selected niches or increase the brand awareness in the market. Again, we are looking for increased sales and revenue. As an advisor, you are looking for new applications of a tried and true product. An example of this was Arm and Hammer Soda. As the home baking slowed – so did their sales. Then someone discovered that the soda took out the smell in your refrigerator and a new market was created driving sales to new highs.
3. Now is the time to begin testing the “next big thing” with the market and customers. Get it started during this phrase since the old product is generating the cash for the new start up. Take action to find new products or services during this phrase. It will pay off with higher sales and growth – just as the old product moves into the declining phrase.
4. Institute more total quality management processes and systems. The ability to improve productivity and lower the cost of an existing product allows for more profitability even when your profit margins are decreasing. Total quality systems (Six Sigma, etc.) take out the unnecessary costs and expenses of any operation. This is not just a manufacturing issue – it can include any functional unit within the organization.
5. In conjunction with the total quality systems in point four, another area that needs more attention during the maturity phrase is the control of variable costs. The lower the variable costs, the more profit is available for each unit sold – improving your cash flow. The key point here is the ability to meet the competition’s aggressive cost cutting to take your sales away. Remember, during the maturity phrase that are many competitors and most are using price in order to “buy” market-share. The only healthy method to compete against the price cutters is to lower the variable cost of each product sold.
6. The last and most important opportunity is the ability to ensure the continuity of cash-flow. Everything is focused upon cash generation during the maturity phrase. Therefore, every decision and action has to consider the consequences on cash-flow. Terms and discounts are watched closely. Sales teams incentives and commissions are examined and then reexamined. Cash is King. The cash generated by a product in the maturity phrase is usually the source of Internet cash flow for other products that are in the start-up or growth phrase.
These are the top six opportunities that have found while working with companies in this maturity phrase (as well as our own product lines that are moving through the same phrases.). So if you have experienced some items that need to be added to our list, please add the item to the comment box below and it will be shared. Thanks again for reading our daily business blog and come back on Thursday for the Declining Phrase.
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