May 5, 2016 10:00:00 AM
Understanding the consumer buying cycle for your company’s product is critical in developing an effective forecast, but what if you were able to dictate the buying cycle? Some companies with strong innovation processes and programs have done just that, and added significant certainty to their revenue streams.
Understanding the Buying Cycle
The buying cycle is how often customers buy a certain product. This can apply to a consumer product such as toothpaste or a luxury car purchase. While there is natural variance in these numbers, it is typically dictated by the lifetime of the product or, in the case of consumable products (such as toothpaste), the product usage rate. Some products have buying cycles that fall outside either of these options, as is the case for smartphones and tablets.
Influencing the Buying Cycle
Companies can affect the buying cycle of their products by leading the market in innovation. When a company is steadily releasing new products that contain truly valuable and justifiable features, customers are enticed to arrange their buying cycles to coincide with your product innovation cycle.
Design Innovation that Drive Buying Cycle Control
A great example of this is the Apple iPhone. Since the release of the first iPhone in 2007, at least one new Apple phone has hit the market each calendar year. While many customers wait until their two-year contract with their wireless provider is up to upgrade to a new iPhone, some go as far as paying full market value to upgrade their phone as soon as the latest model is released.
Why do we do this? The answer is pretty simple: Apple releases new products with updated features that their customers actually want!
In the past, Apple was slow to respond to consumer desires for larger phones; but after a drop in sales, Apple has more than made up for that delay. Apple has since released 3 new versions of the iPhone, with screen sizes of 4.7 inches, 5.5 inches, and just recently, updated its 4-inch screen model with new internal hardware. In addition to the iPhone, they now have two separate sized versions of the improved iPad Pro, and a brand new product, the Apple Watch.
Promotion and Terms That Drive Buying Cycle Control
The real kicker though, is the new iPhone Upgrade Program Apple has launched. This new program allows a customer to pay monthly for the full market cost of their phone, along with a built-in fee for mandatory Apple Care on the product. When the customer wants to upgrade their phone, they trade their old one into Apple and continue monthly payments. It’s an ingenious system because it removes an influential middle man: wireless carriers. While customers still need to pay for wireless connection on their devices, they now are able to pay Apple for the cost of the device without locking themselves into a set two-year contract before they are able to upgrade to the latest Apple device.
This system allows Apple to control when customers buy their new products and to recycle old devices, selling them as refurbished. All of this means that Apple stands to retain more customers and to sell more iPhones in the future as they produce improved products.
We Aren’t All Apple, But We Can Certainly Try
It goes without saying that Apple is unique in many ways; a powerful combination of brand, design and technological innovation. But many companies are in markets where it may be easier than one would think to add an innovative functionality or benefit which is too hard to pass up.
These insights are found through high quality qualitative research, where a study of the customer’s use of the product and their goals leads to a clearer understanding of what additions would offer customers irresistible buying opportunities.
Each company should be asking this question continually: How can we offer irresistible innovations to control the buying cycle?
Forecasting and Buying Cycles
You can bet that Apple factors their innovation cycle, and its effect on customers’ buying cycles, into their forecast. They can expect an influx of upgraders when their contracts are up, and now that they have the iPhone Upgrade Program, they can be even more precise with their numbers by looking at the clients who are close to paying off their phone.
When you’re well acquainted with the buying cycles of your customers, you can initiate informed innovation cycles that help you drive a shorter replacement cycle, keep up with customer demand and improve your products for customer needs, which will help you retain more customers.
Peter Drucker is famously quoted as saying, “The best way to predict the future is to create it.” We can think of no better way to generate accurate forecasts than to drive innovation, which places as much future demand under your control as possible.