For every entrepreneur starting a business out there, their dream is to build an empire out of their venture. While some businesses succeed, most don’t. Entrepreneurs starting out should not only bet on products that will solve problems or meet a need just now but also into the future. This month’s Chase Debate sought to find out what entrepreneurs can do to ensure a long life cycle for their product or services, hence business longevity.
The best place to begin would be to examine the product life cycle. Products generally have five stages in their life cycle.
- Product Development stage. This is the stage where the company conducts research and development. Usually, there are no sales that are made and business at this stage in most cases record losses.
- Introduction Stage. This is the stage where the product is launched. In most cases, this is where it experiences low sales, high costs and no profits. If the company is lucky, they can break even at this stage.
- Growth stage. This is the stage where the product increases in its sales and costs reduce therefore recording a profit. The product will start experiencing its first competitors with more businesses now entering the market.
- Maturity stage. This is the stage where the product is stabilized in its sales, operating costs reduce and profits increase. While most businesses turn into mass producing or become complacent in their product offering.
- Decline stage. This stage is characterized by reducing sales, constant operating costs and reducing profits. The business soon finds itself making losses and if they have not diversified well, this marks their end of operations.
The aim for every SME should be to fast track the first three stages. And then prolong the maturity stage to delay the decline stage which spells the end of the product and sometimes the business. The company can ensure product continuity by;
- Understand the your business competitors. This because competitors play a critical role in the process of determining product continuity. For instance, if the SME has more innovative competitors, they will most definitely accelerate the product to the decline stage. Customers will always opt for improved versions and if your competitors are able to deliver that, you will be out of business before you know it. Understanding the competitors helps any SME to stay ahead of the pack in terms of innovation and market share.
- Understand your target market. The sole reason why SMEs, or any other business, exists is to meet the needs of its target market. Customers need change from time to time, and for this reason, SMEs need to understand the changing customer’s tastes and preferences. This helps them to tailor their products to the customer needs.
- Re-Branding. This helps a business re-energize a product that’s about to enter its decline stage. Re-branding changes not only the packaging or the name, but the overall appearance and vibe of the product.
- Re-design. Product re-design epitomizes innovation. It entails improving product quality and reducing cycle time. Everybody wants an updated version of a product offering ore quality. Re-design helps SMEs keep their customers consistently interested in the business and products.
- Discounting. Reducing the prices of a product could help a SME attract more customers. A new pricing strategy helps the product reach out to a market that could not afford it. Discounts may reduce the profit margin but the sales volume will compensate for this. Basic economics state that low prices lead to increased demand. This strategy is particularly important when the SME needs to clear its stock.
- Expanding to new markets. SMEs do not usually target a very large market pool, especially in terms of geographical locations. SMEs can turn to other regions and target the same market in terms of demographics when they reach the decline stage in their location of operations. The SME can also target a new market in terms of age, gender, income and other demographic factors.
- Diversify. Never put all your eggs in one basket. Once a product becomes profitable and enters maturity stage, it is advisable to diversify into other industries. This is a sort of insurance for the SME since they know that they are covered when the other product ultimately enters the decline stage.
- Create a culture conducive to business continuity. SMEs should also ensure that their environment promotes innovation which is key to extending a product life cycle. Innovative organizations are always ahead of the curve.
It is of paramount importance that SMEs put in place procedures and processes that ensure that the business will survive disasters that are so often in business. These disasters may not necessarily be in the form of natural catastrophes but can be in the form of cut throat competition, tough regulatory environment, inflation, changes in interest rates e.t.c. Disasters are not the only threat to business longevity. Some businesses/products suffer a natural death. SMEs that have managed to last long in their fields have created products that exhibited resilience during tough times helping the business to recover. Others just employ different strategies to stay alive.
Ever asked yourselves how a financial institution comes into play when you’re thinking of business longevity?
Did you know that SMEs in Kenya contributes to a huge chunk of the country’s GDP? However, many still remain largely unbanked.
We challenged ourselves with the same question, because SMEs continue to be one of our core pillars and we’re passionate about empowering them. In January this year (2015) we embarked on a journey to figure out what really and truly matters most to the SMEs. To do this we engaged research companies and carried out focus groups with our existing customers’.
The research results were clear, banks are not doing enough to help the SMEs. So we took it back to the roots and dug deep into what makes us the SME bank. We believe that what makes us truly an SME bank is our ability to listen to our clients & offer them flexible solutions that enables them achieve what matters most to them. We are in the process of establishing a pilot phase of the Biz Hub. This is a free secure space within a few selected & strategic branches for SMEs to meet and network.
Biz Hub Opening Soon.
The Biz Hub will give our clients and non-clients an opportunity to hold meetings while providing the client with access to financial & non-financial services. Services such as advisory services from our dedicated Relationship & Portfolio Managers, internet access and meeting rooms for networking with other market players and presentations to their customers. We have also streamlined our business product propositions & simplified our service offerings giving our SMEs so much more.
Our conventional & faith based product propositions include but not limited to;
- Various transactional accounts in major currencies that meet your specific business needs within and outside the country.
- Investment products with competitive returns – Fixed Deposits, Call Deposits, Chama accounts and savings accounts.
- Trade products/services for both local and international markets – guarantees, LCs, Supply chain financing Contract financing, Escrow account management etc.
- Working capital requirements like OD and Term loans.
- Asset finance, Mortgages and construction loan facilities
Our SME team is constantly reinventing themselves & partnering with external pro-SME growth organizations to give our customers solutions that are tailor made and quick to deliver. In the next couple of months we will be working to bring our assets offering to the forefront and making Chase Bank top of mind for Trade Finance and Asset Finance offerings.
Catch up with the tweets from today’s Chase Debate. We would like to thank each and every person or company that engaged with us, we value your input and appreciate your feedback.
Chase Bank Kenya, Chase Debate, Entrepreneurs, SME Banking, SMEs