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Five Stages of Customer - Product Lifecycle

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With Digital Disruption, be prepared for everything to be disrupted including the models that we rely on for product development. So what has changed? We can now interact with customers ahead of and during the conceptual stage of the design process. The model of product development can be intertwined with the customer acquisition lifecycle.

The old models looked like this:

Product Lifecycle:

  1. Market Need - research, in the really old school sense, involved focus groups where a professional moderator asked leading questions to an assembly of the target audience as the brand manager watched behind two-way mirror. Now, even the most primitive product development cycle involves considerable data analytics.
  2. Product Development - so based on the the market need, use cases are written to reflect how the target audience wants to interact with the product - and the product is designed. Fortunately there are product managers involved who have developed their own channels to the target audience and, at least for established brands, often get it right.
  3. Release - a considerable commitment to the supply, distribution and marketing chain is required to bring a product to market - therefore it is essential to get the design and features right.
  4. Feedback and redesign - as indicated in the previous step, this works relatively well for product iteration where incremental features are required to keep customers. This feedback loop does not work particularly well against a disruptive product since the customer doesn’t predict disruption - they buy it when they see it - so you will have no advance warning.

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Customer Lifecycle

  1. Acquisition - acquire opportunities by marketing the Unique Selling Proposition (USP) to target audience. The important issue here is to find the right channel(s) both in terms of where your customers are likely to be and that are the least expensive.
  2. Conversion - getting potential customers to consider your product is relatively easy - getting them to buy is the tricky part. Larger brands have the advantage especially with products that are relatively undifferentiated - the purchase decision is based more on trust. For highly differentiated products - think disruptive products like the iPhone, consumers are more likely to buy the USP even if the company is relatively new.
  3. Retention - this variable has become more measurable than ever before and is especially important to recurring revenue models. Cable, telephone and Internet providers have long since figured out the metrics of retention and put much effort around optimizing offers to retain existing customers.

The new model merges Product and Customer Lifecycles - and not surprisingly, the customer comes first!

Customer-Product Lifecycle

  1. Customer Need - the advantage of digital marketing is that we can reach our target audience and test the USP before the product is built. Dropbox was a great example where a demo video got thousands of signups making it easy to get funding to finish building the product. Crowdfunding platforms like Kickstarter are essentially pre-sales sites where demand for a product can be tested - think of it as crowd pre-orders. All product teams need to take advantage of test marketing.
  2. MVP - there are so many ways to create an MVP with little to no up front investment. 3D printing is one example of a technology that makes rapid prototyping and testing easy. The idea behind an MVP is to capture the essence of the value proposition in order to get customer commitments. Platforms like AWS are another example of ways that a large scale, MVP can be created with very little upfront investment.
  3. Acquisition - discover the lowest cost channel against an already proven USP. Another advantage of digital marketing is that you can test different channels for very little cost in order to determine the most cost-effective. This may change over time as different ad networks evolve so constant testing is recommended.
  4. Iterate MVP - based on customer input and usage, iterate the finished product ahead of scaling. The highest frequency of product failure comes by scaling the operation ahead of market acceptance.
  5. Retention/Product Innovation - customer retention becomes a continuous metric and allows the product to constantly evolve.

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Benefits of Customer-Product Lifecycle:

  1. Get it right ahead of major investment - test USP and MVP ahead of major scaling.
  2. Take more product risk - with lower cost options to test for Product Market Fit, more risk can be taken testing new product ideas.
  3. Always course correcting even with established product - constant iteration of product is possible given the real time data collection.

Conclusion:

Given the general climate of business disruption it should be no surprise that the models we use to guide our business processes must also change. The survivors in the next round of business disruption will be those who innovate and implement the models of disruption.

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