Last month we looked at selling and some of the issues that involves. So, what happens next? Our widget’s fate is in the hands of the mystical charms of the sales people, we will need to control how sales are doing. In nearly every organisation this is the job of the sales manager, but the information that is gained has to be fed back into the marketing loop. Are the targets sensible? Are they merely sales targets or corporate targets? There is a difference that is critical to the long-term future of the product and the corporation as a whole. Are the targets so rigid that in the first six months they can make or break our widget? What happens next? Does our widget have a future and, if so, are we still in control of it? Let’s have a look at one of the simplest ways we have of checking, assessing and keeping control. One of the most important tools we have available for making sure that our widget has a long-term future and is not merely a ‘flash in the pan’.

 

Where are we?

Let’s take stock and find out where we are. Anyone who has been lost in the middle of nowhere knows that you can’t find where you want to go unless you know where you are in the first place. There are hundreds of different tools that marketing people employ. One of the most important that you can rely on is a simple graph known as a Product Life Cycle. This is a curve (see illustration) that represents sales dollars against time. It’s simple enough, but it can teach us a lot. Not just about where we are, but where we have been and, importantly, how we could improve in the future. This graphic allows us to check on several things: Have we recouped our initial outlay (1)? Are sales taking off and still climbing (2)? Are sales reaching maturity (3), and if so, can we keep them at this level? Are sales falling off (4) and if they are, what can we do about it?

Let’s assume that we are in the sales conference and have just unveiled a product that the sales people are enthusiastic about (crazy, I know, but just humour me), our widget, the price and its packaging.

 

The costs so far

Let’s look at the very first section, the bit that’s below the line. This represents negative sales or, simply put, our initial outlay. What has the widget cost us so far? Do we pile all the costs into this section or amortize some of them, say, tooling, licensing, patent protection and the like, over a number of years? This decision can have immediate effects on the money that’s needed to launch a product. Mostly, these initial costs will be coming directly from the marketing budget. There’s nothing wrong in that, but is it all marketing? How many boardroom battles have come about with this little argument? Marketing versus production, a titanic tussle! For this illustration it matters little, the big issue is that there’s a negative amount that needs to be recovered but how can we do that; a long-term project or a short-term hit? These issues affect the pricing policy and will have been a big factor in the marketing peoples’ decision about price. In general, products that have an innovative content, that take a lot of pre-production, will need higher prices to reflect these initial costs and the unique features and benefits of the widget.

 

Let’s get selling

Our widget is out in the shops and taking pride of place at our trade shows. We’re getting orders and the sales and marketing people are working together like the gears in a well-oiled machine; things are taking off. At this stage we move onto the second section of the curve (2). In marketing speak, our product is a ‘rising star’, selling well, on the up, making its mark and carving out a niche in the marketplace. How brilliant is that? We are recovering our costs, not all of course, but our widget is now contributing to our overall overhead recovery; things look great and we are confident. We can’t help selling the widget as word of mouth, testimonials and advertising are doing their jobs, what could go wrong? Is there an end to this upward curve? Well of course there is, we are feeding back the information to the sales manager making sure things continue, but let’s say that the writing is already on the wall.

 

Coming of age

In financial terms, we move into the most important part of the product life cycle – maturity. This stage of the life cycle is an extremely important one that needs careful management. More control, more feedback, more management. As the sales curve begins to flatten out we need to consider just how long this part of the life cycle will last. It’s easy to be caught up in the euphoria of having a great seller, but we need to look ahead. The day-to-day management is down to the sales manager; the future is the marketing people’s domain. This is where the widget becomes known, in marketing speak, as a ‘cash cow’. Why? Well, because we are milking it for all its worth! All of our set-up costs, the below the line expenses in part 1 of the curve have been recouped. Everything else is ambrosia. Apart from the costs of production, packaging and marketing maintenance, advertising and the like, this widget is just a money machine. Profit levels are increased as the inherited costs are shed. Everybody’s happy, all except the marketing people. They are already looking ahead, with knitted brows, to the final section of the curve.

 

Buy it or the dog gets it!

A car seller in the USA concocted one of the most infamous and successful advertising strategies. During his TV commercials he said, and I am paraphrasing here: “Either buy the car or the dog gets it.” In this final stage (4) of the curve we are getting worried. The widget is no longer performing; it’s hanging about in the departure lounge ready for its flight to retirement. In marketing speak it’s a ‘lazy dog’. There are two things that you can do here and both rely on pragmatism, although your brand manager may not see it that way. Firstly, you can shoot the dog and get rid of it, sometimes a hard thing to do, say goodbye to an old faithful friend, but if it’s a burden it may be the best option. The more interesting, and some would say more appropriate course of action, is to try and teach it new tricks, resurrect it, breath new life and fire into it. Maybe, by mixing a metaphor we can create a phoenix from the ashes of a lazy dog. Next time we’ll look at ways to do just that.