The Fruit Fly Product Lifecycle

Fruit flies live for an average of 45 days from the moment an egg is laid. It really is not very long, but here is something that in reality has an even shorter lifespan – an app.

According to a number of specialists in the area apps including Josh Clark who shows in his book Tapworthy that the life of the average app on the average user’s phone is less than 30 days. In that 30 days the user is likely to open the app up to a total of 20 times on average.

And this has what to do with the price of onions?

Well think of it this way. Most of you know about Moore’s law of computing that essentially says speed doubles every two years, well what if there was a similar one for some markets?

The app market is one, where hundreds if not thousands of hours go into developing apps before they launch. When they do launch they have a finite amount of time to make it into the charts and make it big before something better comes along. The worst part of it is that all of this is measured in days now, especially when you consider that there are now more than 19,000 new apps released in the Apple App store every month

Part of this may well be the hype around becoming rich on the back of apps, so there is a kind of ‘app rush’ as everyone tries to get their share.

However I think more fundamentally the desire for new and exciting things in the market is such that consumers in particular are happy to buy and discard purchases in a cycle shorter than the life of a fruit fly.

The point of this little article is to suggest that you might want to ask yourself a question. Do I sell products and services that are not serious investments and will this kind of fruit fly lifecycle start to affect my business?

If it will what does that mean for your products and your business?  What can you do to turn the fruit fly product lifecycle to your advantage?

Next week, I’ll be posting 3 entries on the blog to help you with some ideas about how to turn very short product lifecycles to your advantage. In the mean time I hope this helps and it would be great to hear your thoughts and ideas on the subject.

Shareholder Value 4 - The Business Model Fluctuation

Last one in this series and we’ve deliberately saved this one to the end, because it is the one variation where modern shareholders and customers are in complete harmony - usually.

You already know that the way people buy and use products is very different to the way it was ten years ago:

1. iTunes changed the music industry with downloads
2. Software as a service changed the software industry
3. Amazon changed the way the market publishes and buys books
4. The Internet changed the way people look for information on products from holidays to cars before they visit an outlet to make the final purchase.

So here is the point of this last entry in this series. Is your business model the best one for your customers or the best one for your shareholders?

Software is a good way of covering this. Much of the software on the market is now being bought by customers on a software as a service basis. 

This is a big change from the old up front license cost which was great for shareholders because it meant recovering the cost of development faster, not to mention being able to sell upgrades when a new version was launched. 

However the market wanted something a different so when technology permitted the industry responded with software as a service which enables buyers to subscribe to a piece of software on an open ended contract paid for usually on a monthly basis. This keeps the up front cost down and provides constant updates and upgrades. Most markets like this a lot.

It is also very good for your cash flow and ultimately your profitability as over the long term you will probably get more from each customer than you would selling a traditional license. If you are selling software you already know this, but what if you are selling cups of coffee, how does this help?

Well here’s a thought, what if you sold a monthly coffee club membership that included your customer’s first cup of the day and a ten percent discount on every other cup of coffee they buy? How many customers would buy into that? What other benefits would your customers see in this? Would it make it easier to predict your cash flow and your stock requirements?

The point is this. There have been more changes to the way that markets buy in the last 20 years than ever before so don’t just assume that the business model you have always used is the one the market wants or indeed the one that is best for you or your shareholders. 

As always I hope this helps and I'd love to hear your thoughts and experiences on this.

Shareholder Value no 3 – Where do I find the value

Yesterday we talked about customer expectation and thanks to everyone for all the positive comments. Today I want to focus on identifying where the value is to your customers.

To give you a quick example, a few years ago we did a project for an online wealth management system where the vendor thought that being online was the real value to customers. The market on the other hand listed two or three other areas where it felt the real value was, having assumed it would be online.

So why is this important? 

Well there are a few, but for the purpose of customer value, understanding where the market sees value is in our experience the primary data you would use to define price and profit from your products.

This comes down to market knowledge, but going back to the example I gave above, if that particular vendor had tried to sell its system with all the focus on the ‘online’ part, it would never have been able to charge enough to profit adequately. On the other hand by focusing on the areas where the market perceived value, the company was able to hold price higher and attract both customers and routes to market it would not otherwise have been able to. A good result all round.

This is not something you can read up on, or get by checking out the competition. Its also not something we would recommend you get someone else to do for you. Understanding where the real value in your market is can only come from asking it directly. I can almost guarantee you’ll be surprised by what you find and how much more you can charge for your products and services while still delivering value to your customers – good news for shareholder value too!

As always I hope this high level introduction to a way of thinking about value helps and I would love to hear about your experiences.

Customer Expectation – No2 in the Shareholder Value Series

Over the weekend we wrote about shareholder value and why customers frankly couldn’t care a monkey’s about it. This entry focuses on the first of 3 ways that you might consider as ways of delivering value to your customers, while still ensuring you profit.

Expectation Management

Have you ever bought something from a vendor having been promised a great deal, only to find you get considerably less than you were promised? You know the kind of thing I mean, something like switching mobile telecoms provider having been promised better coverage, cheaper bills and generally better service. Then you find the coverage is woeful, the calls are more expensive and so on. So right from early on in the relationship you lose faith in your new supplier - chances of you staying with the telecoms company?

This is a much more common experience for customers than you would imagine, but it is also one that you can easily avoid being tarred with. We call it Expectation Management and it’s a very simple exercise.

If you really understand what it is that your market perceives it needs, then you have a template for expectation. You can measure your products and services against that template and decide where you want to sit:

• Does just one offering work for the market?
• Does it work better to offer basic, middle and top level versions to suit different sections of the market?

Whichever way you decide to go the real trick, the thing that enables you to set expectation properly is ‘boxing the service’. This means writing a specification of service, publishing it and most of all sticking to it with your customers. 

If you are open and clear about this from the very start of your relationship with your customers, the simple truth is that you are managing their expectations and making sure they know what you will do, what you won’t and how much it costs. This gives the market the ability to place a value on your offerings and when they decide to purchase, they are doing so with a clear understanding of what they get for their money.

Sounds simple and in truth it is. It just needs some solid market knowledge and a bit of work to define your offering. The good news is that this is also one of the best ways for any company to manage its costs, while delivering what its customers want and looking after shareholder value.

Hope this helps and there will be another tomorrow. As always your comments and views are always welcome so please share them.

Do Your Customers Care About Shareholder Value?

Anyone who has been following markets and business for any length of time can’t have missed the focus that so many companies have on shareholder value, which in small companies translates to owner value or "that Porsche I really want". 

In our experience of working with companies and helping them get close to their markets, there is one thing that they all have in common – their customers couldn’t give a monkey’s about shareholder value because it rarely equates good value for them.

If you take the time to look at companies where shareholder value was put at the centre of their strategies, they tend to be the companies where customer value is lower and customer dissatisfaction is higher. Just spend an hour or so online looking at this from a customer satisfaction perspective and you’ll find plenty of examples – so for the purpose of brevity I won’t bore you with any.

Its actually a very challenging problem because to deliver genuine customer satisfaction means more investment in ways of understanding them and delivering what they want, while shareholder value comes out of profit, which means controlling what you spend on everything including customer service and so on.

However if you are a small or new business, there is one single truth and it is this. Without delivering your customers what they want, or least most of it, you won’t generate the enthusiastic advocates you need to attract more customers. Why do I say this, well put bluntly the chances are you can’t compete in marketing spend terms with the big players, so you have to work customer by customer to build your business. So every customer that you can genuinely delight is much more likely to help you win another customer.

You might think I am advocating a situation where you toss the idea of profit out the window, but I promise you I am not and over the next week, I will post 3 other entries to help you with some options for delivering exceptional customer value, while still profiting – first one is on Tuesday and will be focused on expectation management.

In the meantime and as always I’d love to hear others’ experiences and thoughts on the content of this entry