The Innovation Changent® Framework defines the interrelation between the product lifecycle and the customer lifecycle.

Over time, the product lifecycle goes through several phases: (1) market development, (2) growth, (3) maturity, and (4) decline (Fig 1).

  1. Market development: the introduction of a new space for product development.
  2. Growth: products from alternate companies become prevalent.
  3. Maturity: point which the market nears saturation and opportunity to add value lessens
  4. Decline: the point when a market becomes superfluous.

Sales steadily increase from phases 1-3, however declines in stage 4.

product lifecycle

Fig 1

Over time, the customer lifecycle goes through several phases: (1) awareness, (2) consideration, (3) evaluation, (4) purchase, and (5) loyalty (Fig 2).

  1. Awareness: education and acknowledgement of a given business or service.
  2. Consideration:
  3. Evaluation: comparison of a business or service against another.
  4. Purchase:
  5. Loyalty:

From phases 1-4 customers learn about and begin to engage with the product.

customer lifecycle

Fig 2

At the phase of maturity of the product lifecycle and between the purchase and loyalty phases of the customer lifecycle, there becomes a Critical Innovation Point.

This is when businesses have one of two options;

  1. Focus on marketing and advertising initiatives to increase customer awareness to drive customer acquisition.
  2. Research their current and potential customer needs, gain deeper understanding of trends in the market, and continuously test and launch new features .
innovationchangent-framework-v1 copy

Fig 3

 The first option will result in short-term customers (Fig 3, left side of image); these customers were acquired more so likely due to price cutting tactics, sales, etc. These customers will disengage with the product and make their way back through the awareness and consideration phases of the customer lifecycle; this is when customer churn rates increase.

The LTV/CAC* (lifetime value / customer acquisition cost) is low (less than 1); value is minimal.

 

The second option will reduce customer churn and result in long-term customer loyalty (Fig 3. right side of the image). By continuing to revisit customer wants and needs, and analyzing the market to explore new or different product development opportunities (i.e., white space), the value of the product paid for remains the same or increases. Thus, should other companies focus on their marketing / advertising efforts, when a customer compares the value of the product which may (for example) be less expensive versus the product which is more expensive but offers more features / functionality, the customer will, more often than not, remain loyal.

The LTV/CAC (lifetime value / customer acquisition cost) is high (more than 3); value is strong.

 

*LTV/CAC = [(Revenue Per Customer – Direct Expenses Per Customer) / (1 – Customer Retention Rate)] / (No. of Customers Acquired / Direct Marketing Spending)