Posted on May 23rd, 2019 by Michael Schmid
As we continue to explore strategies to drive organic growth within organizations it is important to look beyond new product development and dive deeper into some of the other product-related strategies that can be employed to encourage firm growth. Some of the more basic product-related strategies that firms can leverage include improving an existing product or service, extending product lines, or increasing market penetration. The focus of this brief article is to examine the concept of improving an existing product or service in order to promote further growth (i.e. – sales) of the product (or service) or product line.
While new product or service development can prove to be a significant growth engine, and certainly it is one of the more “sexy” and exciting growth strategies, it is clear that, every product or service experiences a lifecycle, and this product or service lifecycle should be acknowledged and managed. The product or service lifecycle is nothing new, it is one of the most basic concepts we first learn in our marketing classes. Although it begins early with the stages of ideation and development, the more commonly known elements of the lifecycle are introduction, early growth, continuous or sustained growth, maturity and decline. It is the maturity stage in which management typically looks to apply product or service improvement strategies in order to resurrect growth. The maturity stage for any product or service is where we experience sales growth flattening out. The product or service may be generating a huge amount of revenue and command a significant portion of market and top-of-mind share, but its sales growth rate is nothing like what was produced in the former stages of early and continuous growth.
So, faced with perhaps a once stellar product or service that continues to generate healthy revenues and profits and is both proven and accepted in the marketplace, the idea of continuing to invest (i.e. – R&D spend) in the product or service likely makes strategic sense. Firms can look to resurrect the growth of a mature product or service simply by taking steps to tweak or improve the current product or service. Admittedly, a product or service that has reached the maturity stage usually enjoys a high level of use and experiential feedback, so this is the stage in the lifecycle in which product managers and teams should seek to more fully understand what customers value and dislike about the product or service. Armed with such voice-of-the customer feedback managers can better develop product or service improvement strategies and communicate to development teams and/or R&D what improvements in the product or service are required to gain even further acceptance, repeat purchases, greater penetration and thus rejuvenate growth.
A contemporary case-in-point with respect to driving growth through product improvements or “upgrades” is Apple’s systematic release of new iPhone versions. Until very recently Apple could count on double digit percentages in revenue growth associated with each release of a new (improved) iPhone version. In fact, the greater perceived improvement between the previous and new iPhone versions, the more likely consumers have been to upgrade. One reason Apple has recently stumbled with respect to its growth in iPhone sales is that this gap between what consumers perceive in the improvement from their existing smartphones to the new versions has narrowed. A lesson for leaders to learn from this is that when an organization pursues a growth strategy through product improvement it is important to “build-in” and communicate a high level of improvement between legacy and improved products or services.
Stay tuned for the next article in this organic growth series, in which we will look at product or service line extensions as stimulants to drive further growth.