April 8, 2016 | Dan Bernoske
Your sales channel options range from low-cost, low-touch self-service to high-cost, high-touch field sales. Your product life cycle follows a predictable, four-phase path. It is critical to align your sales channel strategy to your product life cycle.
As your product matures, margins naturally become slimmer. New competitive threats and evolving customer demands put downward pressure on your customer lifetime value (CLTV). Unique value propositions can easily become commoditized. Your margins get squeezed as your product evolves through its four phases of life:
- Introduction: Focus on building awareness and establishing a market.
- Growth: Build preference for your brand and grow market share.
- Maturity: Defend market position while maintaining your margins. Sales growth begins to decline as competition crowds you out of the market.
- Decline: Make choices about the future of your product:
- Maintain the status quo and milk the cash cow;
- Invest in the product with new differentiators; or
- Kill the product by selling it or liquidating remaining inventory
Meanwhile, customer acquisition cost (CAC) is taking a bite out of your bottom line. Your go-to-market choices play a significant role. In fact, much of your CAC:CLTV ratio depends upon how you select your sales channel to match where your product is in its natural life cycle.
How you engage with your buyers can range from free to using a $500,000, fully loaded field sales rep. On the low end, Freemium and self-service models are well suited for low- cost products. While common among new, innovative web products, this approach should also be considered for highly matured, commoditized products. On the high end, field sales with sales support resources are best for high-cost or differentiated products. Regardless of choice, always consider the life cycle of the product you’re bringing to market.
As your product matures and market dynamics change, reevaluate your sales channel strategy. Make sure the costs do not outweigh customer lifetime value. Enable your buyers to buy the way they want to.
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Dan Bernoske
Go-to Market Innovator
Learn more about Dan Bernoske >
Prior to SBI, Dan held business development, sales, and product management leadership positions at several start-up companies, developing Apple iOS platforms and E-Commerce-based social networks. Most notably, Dan was co-founder of Video Lantern, an online video advertising sales and operations firm. He is Six Sigma certified from GE.
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