Market Life Cycle Model
Frank Lynn & Associates uses the Market Life Cycle model as a core element of its channel consulting engagements.
The model postulates that truly new markets will almost always be best served initially by direct sales channels. Customers who are “early adopters” typically want, need, and are willing to pay for the high level of technical sales and support assistance they can only get from a vendor directly.
However, as the early adopters give way to the leading edge of the mass market, customers’ needs change. Compared to early adopters, the early mass market is more educated about the product and is unwilling to pay the high cost associated with one-on-one direct sales. However, the early mass market wants solutions tailored to specific industries and integration of products from multiple vendors. So, in this phase customers turn to technical or value-added channels, sometimes referred to as specialists, integrators or value-added resellers.
The market shifts again as cost-sensitive late mass market buyers and laggards enter. These customers are more interested in widespread, rapid product availability, convenience, and low prices. Here customers turn to logistics-focused channels that can generate huge cost efficiencies via large-scale warehousing and one-stop shopping services. Ultimately, customers turn to hyper-efficient channels such as online.
As explained in the Market Life Cycle, one of the reasons suppliers use indirect channels is because, over time, customers prefer to buy from the indirect channels. To be successful, a supplier needs to sell where its customers want to buy. A supplier that fights against this trend is often doomed to failure.
The Market Life Cycle is a comprehensive framework that allows companies to anticipate channel conflicts, jump the chasm into the mass market, and manage multi-channel strategies.