Next, even if our competition hasn’t launched yet, they are getting closer to it. With each passing week we lose more of our opportunity to win customers who will stay with us even after the competition launches.
Finally, the market for the product may be seasonal or event driven. If we are late to market, the seasonal rush may be partially or completely over, or we may miss a trade show, or a sales meeting, and lose the associated buzz that comes with it.
These cases are common. As a result, our peak monthly profits are reduced because either our sales volumes are reduced, or we lower the sales price and reduce our margins, or both. Unfortunately, the amount of the reduced peak is difficult to estimate. To make matters worse, some people have a hard time accepting that there will be any reduction in the peak at all. Instead, they choose to believe that if (whenever) we build it, they will buy (eventually), at the same price.
When product life-cycles extend beyond 5 years, it is common to assume that every customer lost as a result of being late to market will be back to buying from us by year 2 or 3. This is not the case. The only way to catch up when sales are still increasing is to increase the slope of the ramp via additional investment in sales and advertising. As discussed previously, if this additional investment is cost effective, it should be in our baseline on-time curve as well.