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Emerging Products Can Deliver More Sales

No matter what it is that you sell or how well it’s going now, every product has a life cycle that begins when it’s introduced into the market and ends when it is eventually discontinued. It’s essential that you know where each of your products is positioned in its life cycle, and that you use this information to plan the future product strategy of your business.

A firm with too many products nearing the end of their life cycle has a serious problem. Businesses need to conduct regular reviews of their existing products to identify those nearing the end of their life cycle in sufficient time to plan and develop their replacements.

Decreasing sales volumes are one indication of a product that may be approaching the end of its life cycle. Falling profitability is another sign to watch out for. Your accountant can conduct a product by product profitability review that will show clearly which products are selling at sufficient volume with a healthy margin of profit, and which products are in decline and being carried by the more profitable ones.

Not long ago CD players and cellular phones were emerging products. Now they’re so common in most parts of the world they’ve become almost commoditised, selling largely on price. So now, at this new stage in their life cycle, differentiation by enhanced features is essential to keep manufacturers in business. In the future they will no doubt be replaced by a newer technology altogether.

Freshen up your offerings

An aging product range is a drain on resources and can make your business appear dated. Examine your present range of products to identify any that are at the end of their life cycle and should be deleted to make way for emerging products.

Emerging products are good for the image of your business. They demonstrate to present customers that you’re working to give them something new and better. They also show potential customers that you’re innovative and your products are worth looking at.

Emerging products can add excitement to your business and to the other products in your range. They don’t have to be totally new and can even be derived from existing products to save on development costs. The most important thing is that they are seen as ‘new’ by customers.

Look around for good ideas

There are several places you can look for ideas about new products you can profitably introduce:   

  • Talk with your customers and ask them to recommend new products that will improve your range. This is also a good time to ask for their opinions on which of your products have reached the end of their life cycles.
  • Examine your competitors’ offerings and consider introducing products similar to those that are proving successful for them.
  • Review trade journals and industry websites for ideas. Good ideas for new products will often come from other countries and can be discovered in the content of editorials in trade publications.
  • Ask potential customers for their comments, including whether they’d change suppliers and buy from you if the new products were in your range.
  • Talk with members of your own team. It’s surprising how many times successful ideas for new products have originated from personnel within a firm.

Test and research

 

When you identify a product you believe you could successfully introduce, prepare a marketing plan for it and calculate its potential contribution to your profits. Especially critical in these calculations are product development costs and pricing.

If an emerging product is intended to replace an existing one, try a calculation based on the sales levels of the product it replaces. Don’t assume that sales of the emerging product will automatically be higher; new products often take time to become established.

You might be replacing an old product that has become unprofitable but still retains a high degree of consumer loyalty. In this case your marketing plan needs to incorporate a direct approach to existing customers that will encourage them to switch to the ‘new and improved’ offering.

Manufacturers of men’s razors are experts in this technique. When a new razor cartridge is introduced the old product remains on the supermarket shelves but the handles are dropped from the range. Eventually the old razor handle fails, forcing a purchase of the latest model handle/razor combination.

If possible carry out a trial in a limited test market to judge customer response. This is especially useful for retailers adding a new product to their range.

The ideal product portfolio incorporates a balance of products at various stages of their life cycle; some emerging, some middle-aged and some mature (but not yet in a state of decline). Mature products need to be closely monitored so they can be phased out before they require excessive marketing support and become unprofitable.

Until next week,
Mike Reddy
www.syb.com.au