Your Industry Lifecycle

Abstract

SMARTech Convergence Series: Blog 2 
Evaluating the industry life cycle helps companies understand the relative cost and benefit of competing for certain types of customers.

7 min read | By Justin Perry

What to Expect: 

SECTION 1

What is an Industry Life Cycle? 

The industry life cycle reflects the journey people take from:

  • Having a problem
  • Trying to solve a problem
  • Solving the problem
  • Finding newer, cheaper, more efficient ways to solve the problem.

Similar to how an individual progresses through different stages of the buyer’s journey, each industry progresses through different stages of maturity as well.

SECTION 2

Why Evaluate the Industry Life Cycle?

Evaluating the industry life cycle helps companies understand the relative cost + benefit of competing for certain types of customers. Based on this understanding, companies can get closer to identifying + quantifying:

  • The “real” business opportunities in front of them
  • The opportunity costs
  • The volume of potential customers
  • The relative competition levels for that volume

As a result, business leaders, alike, will be able to easily answer questions like:

  • “How much will it cost to acquire market share?”
  • “How much will it cost to protect or maintain market share?”
  • “What are the essential changes that need to be made in order for our company to drive a substantial business result.”
  • “What is the expected cost to acquire new customers?”
SECTION 3

The Four Stages of Maturity 

Within the concept of SMARTech Convergence, we have identified four different stages in the industry life cycle (Stages of Maturity).

Your industry can reside in one of the following stages:

  1. The New Stage
  2. The Growing Stage
  3. The Established Stage
  4. The Contracting Stage

Your Industry Maturity Stage is determined based upon the volume levels of:

  • Prospective customers that are aware of their current problem and acknowledge the need for a solution
  • Prospective customers that are actively seeking a solution to their current problem
  • Direct or indirect competitors that are competing against you to solve for the problem of the prospective customers.

We’re going to touch upon the characteristics of each stage of maturity below and explain how customer acquisition is affected.

Stage 1: The New Marketplace 

What is it?

Often times, a new marketplace is created in response to one of the following reasons:

  • There is an innovative solution to a root problem that has been misunderstood for many years by the general public
  • There is a solution to a root problem that has never been addressed before or has been only partially addressed

Customers within the target group have experienced the problem and they may be aware of some of the existing solutions. However, the products or services currently available are not effective enough and this creates a gap in the marketplace. Inevitability, this gap provides the opportunity for a new marketplace.

What are the benefits? 
The company that manages to define a new marketplace gains untouchable brand equity. In addition, the company has the unique opportunity to be the industry leader, to shape the customer’s perception of the solution; and to create a connection in the customer’s mind between the brand and the solution.

When the marketplace is first formed, there is no real competition because no other company is offering the exact same solution to solve for the the exact same problem. The first wave of competitors will find it difficult to take away market share from the company because they will need to prove their solutions are better in some way.

More often than not, the company that shapes a marketplace usually holds the majority of the market share. Upon marketplace expansion, the company will be first to gain incremental market share; and the last the lose market share when the marketplace declines.

What are the challenges?

Customer acquisition in a new marketplace can be time-consuming and resource-intensive. Prospective customers need to be guided all the way from understanding the problem, to realizing they need a solution, to gaining confidence in acquiring the new solution.

The challenge resides in educating the customer about the problem and solution; while proving that other pre-existing solutions are ineffective or incomplete.

Stage 2: The Growing Marketplace

What is it?

As more companies enter the marketplace, the target audience becomes intrigued in learning about the new and innovative solutions available to them. In a growing marketplace, the average customer is aware of the solution and is looking for it.

What are the benefits?

The company or companies that initially shaped this marketplace have validated that their solution is viable. These companies have done all the heavy lifting in regards to propping the marketplace and generating awareness. In this stage, demand outpaces supply. The number of people actively seeking the solution in a growing marketplace is larger than the number of companies that are able to offer it.

The growing marketplace is a fertile ground for effective customer acquisition because the volume of competitors is low compared to the volume of potential customers. Market share can be acquired with very little effort.

What are the challenges? 
To gain market share in a growing marketplace, companies typically do one of two things: They either offer a better, more effective, more reliable version of the original solution; or they offer knock-off version at a more attractive price point.

The challenge can be a result of:

  • Marketing ineffectiveness
  • Technology inefficiencies
  • Product development errors
  • Or, the inability to create a compelling offering

Stage 3: The Stagnant Marketplace

What is it?

The marketplace becomes stagnant when it reaches critical mass in terms of the people that are:

  1. Aware of the problem
  2. Actively searching for a solution and
  3. Have an idea about how to find that solution

Competitors at this stage are trying to siphon from a marketplace that is not expanding. There is too much supply and not enough demand.

What are the challenges?

In a stagnant marketplace, the cost to acquire customers dramatically increases due to the law of supply and demand. As a result, companies will lower their prices in order to compete more aggressively in terms of advertising cost. At this point, the companies with least brand equity, the ones that are positioned as alternatives and knock-off brands, will be the first to lose market share due to their reliance on other companies to drive awareness.

A stagnant marketplace puts the power on the side of the customer; and the customer can be more demanding. The customer is knowledgeable about the potential solutions, and they can easily perform a cost-benefit analysis to aid their evaluation process.

Stage 4: The Contracting Marketplace

What is it?

The marketplace becomes stagnant when it reaches critical mass in terms of the people that are:

  1. Aware of the problem
  2. Actively searching for a solution and
  3. Have an idea about how to find that solution

Competitors at this stage are trying to siphon from a marketplace that is not expanding. There is too much supply and not enough demand.

What can a company do?

Every marketplace reaches the contraction stage sooner or later. It can’t be avoided; but it can be predicted with proper analysis and monitoring systems like the ones employed by the SMARTech Convergence methodology. Companies that have this awareness can then reinvest a portion of their revenue in researching and identifying new business opportunities within new marketplaces.

A contracting marketplace will not be a threat to a company that understands the Lifecycle of the Marketplace and is able to correct course before it’s too late.

SECTION 4

SMARTech Convergence + Industry Life Cycle

A new marketplace vastly demands different customer acquisition strategies; compared to a growing marketplace. Additionally, a company should be ready to recognize a stagnating or contracting marketplace and to strategically invest in entering new marketplaces.That’s why understanding the marketplace dynamics is the first step in the SMARTech Journey.

When a company is on their pathway to SMARTech Convengence, they are constantly identifying opportunities to tailor internal strategies in order to solve their customer acquisition problems. There are no limitations to adopting the SMARTech Convergence Methodology. It can be applied by anybody, in any type of business, in any stage of the industry life cycle.

What's Next?

How to Identify New Business Opportunities

The next step on your SMARTech Journey is evaluating Marketplace Awareness Factors to identify new business opportunities.
Continue the Journey