It is a reality that the investment needed to launch a new product increases with every generation. It therefore follows that the simpler a product is to design and manufacture, the more cost efficient it will remain during the course of its life. It also follows that by extending its useful life, the product will become even more profitable.
In a previous article we looked at why Product Lifecyle Extension as opposed to a Complete Re-Design is applicable to products that have become obsolete, but what are the benefits for a product in the middle or third-quarter stage of it’s life?
There are two primary reasons to consider a product facelift as opposed to the design of a replacement; sustainability and profit.
Sustainability and environmental consciousness
We live in an age where environmental consciousness is rapidly converting the ‘purchase, use and discard’ linear economy model of past decades with an attitude of ‘Repurpose, Reuse and Recycle’, Product Lifecyle Extension is the one of the keys to maintaining functionality and uptime whilst minimising environmental impact.
If your product is a component of a larger system, works in conjunction with other technologies or is a consumable part then building new functionalities, directly or as plug-ins, into your existing design is the most straightforward way of maintaining backwards compatibility. In the past companies have traded upon a lack of backwards compatibility to increase sales of complimentary products and sundries, however more and more consumers and companies are considering the environmental impact of their purchases when making their buying decisions.
If you’re a multibillionaire running your business as a hobby or for solely altruistic purposes then this may be less of a concern, but for the majority of us we require our businesses to make a profit, or at least breakeven and provide a living.
At the most basic level there are two ways to increase your profits.
1. Sell more (economies of scale).
2. Reduce costs.
If we look at the incursion of costs throughout the product lifecycle, the bulk are incurred at the front (design, approval, marketing etc) and tail (obsolescence management, excess stock etc) end.
When it comes to the recovery of these costs they are usually amortised over the life of the product, averaging a breakeven point somewhere between the first and second year of sales.
This is a fine and acceptable model, and really the only way to get a product of the ground unless you have a bunch of liquid start-up capital. The point at which PLE can make a huge difference is when a competitive product enters the market and effectively renders yours obsolete. THIS WILL HAPPEN AT SOME POINT. It may be sooner, may be later, but it will happen. Technology is advancing at an exponential rate, just look at how often mobile phone OEMs upgrade their range of handsets and the new functionalities that arrive with each upgrade. This is the point at which you have a choice to make; design a replacement product and launch it whilst removing your now obsolete product from the market. OR give your existing product a facelift, either proactively as soon as you discover new technologies, or reactively to keep up with the competition.
To understand the financial advantage, take the (very simplified) example of the following two companies:
As displayed by the example above, using a facelift to employ new technology and extend the life of the product results in higher profit margins over time.
To see this strategy being employed successfully the best place we can look is the automotive industry. Ask most people if they have heard of the Ford Escort and there is a 90% chance that most people are familiar with it even if they have never owned or driven one. Look at the photos below. 30 years apart the two cars share no components whatsoever, yet they are both Ford Escorts, of the most well-known models in the world with huge levels of product loyalty from Ford’s customers.
Ford have achieved this level of recognition and loyalty not by designing a brand-new car and having to market it every time the motor industry advances, but by keeping the same product and incorporating new features as they become available.
This is applicable to almost every product in every industry, even subliminally we all have our favourite ‘comfort-pick’ brands and products that we know we can rely upon, including designers and commercial purchasers. If your product is selling consistently then your clients are displaying product loyalty and you should absolutely capitalise upon this.
If you are considering a revamp for your products 4e Technology has expertise in various industries, including highly regulatory markets such as medical and defence, and with over 20 years electronics knowledge and experience of dozens of Product Lifecycle Extension projects such as analysis of products to make design improvements and extend their functional lifetime. Increasing performance or improving the functionality of legacy products and mechanical components. For example digitising analogue designs to embed data manipulation and storage or adding IOT functionality to allow unit performance recording or pay-per-use options. We offer a comprehensive service to help you through improving the functionality of your product and manufacturing it for sale.
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Call us today on 01794 874 227 to discuss how we can help you, or drop us an email firstname.lastname@example.org