At threenine we get to deal quite a lot with new Product Development which lets face it, is the exciting part. Although complicated and there is a lot that goes into it, especially if you want the product to be successful. You can’t just take the Field of dreams approach of Build it and they will come. There is a lot of analysis, investigation and lets face a whole lot of hard work that goes into it. As Marty Cagan puts in his book Inspired : How to create Tech Products Customers Love
Tech Product Development is hard work and product teams are usually comprised of a Product Manager and usually somewhere between 2 to 10 engineers. If you’re developing a user facing product, you can usually expect to have at least a couple of Product Designers and Graphic Designers on your team too.
The truth successful Tech Product development cannot be achieved on a dream and hiring a freelance developer on Fiverr. That to be brutally honest is a guaranteed path to failure.
Talented Product Managers, Engineers, developers and designers who have developed and delivered successful tech products know exactly how much time, effort, blood sweat and tears goes into to developing tech products and I can assure you, they won’t be selling their time for cheap rates.
The flip side of Product Management is equally as difficult, is how to manage end the life the of a product?
When it’s the end of the road...
When you’ve put in all the work, you possibly can to deliver a product that not only adds value to your users, but has provided enormous value to your business, but as they say nothing lasts forever. Products will eventually get to their sunset years. So how do you plan for it?
In INSPIRED, technology product management thought leader Marty Cagan provides readers with a master class in how to structure and staff a vibrant and successful product organization, and how to discover and deliver technology products that your customers will love
When should you end a products life?
There are different reasons why a product dies. These typically include:
- A new product release that makes the production of the current one obsolete
- The product no longer generates sufficient revenue to justify its maintenance costs
- Technology changes that make the product impractical
- Competitive pressure that is so high that the product is no longer viable
- The product consistently fails to meet profitability thresholds – essentially becoming a black hole swallowing up your operating budget and not generating the required revenue to keep it afloat
- Executive decisions like the company exiting a particular market, meaning the product ceases being a strategic fit for the direction the company is taking
Sure, the scenarios look clear-cut on paper, but the reality on the ground is much more different. Retiring a product is an intricate process and not a one-time event. Let’s break down how you can approach it strategically so as not to disrupt your organisation.
Step 1: Deciding that a product has come to its end of life
Since the product doesn’t exactly have a ticking clock as it approaches its death, and there isn’t an “end-of-life” algorithm that you can whip up for the different products that your company provides, there will be factors that you will need to consider in making this decision. Here are issues to weigh:
The current performance of the product
How are its revenue trends? Has the product been selling well in the recent past – especially in comparison to its targets? Look at the sales curve over a long duration, even for a couple of years, and observe if there is a consistent downward curve. Different metrics can be used here, such as new customer acquisitions, maintenance agreements and other aspects that are specific to your company.
Key performance indicators like the monthly recurring revenue (MRR) from the product, lifetime value (LTV) and customer acquisition cost (CAC) come in handy. For instance, the LTV:CAC ratio of the product will show you how much is being spent on it to get a buyer, and how much the customer will spend on the product over time. This is in turn correlated with customer loyalty scores. Working with the financial team, you can determine the contribution of the product to the company’s bottom line.
Note there is a key distinction that needs to be made here: a product that is on the close of its useful life, and one that is simply facing a slump (such as due to unfavourable market conditions which are temporary). Therefore, the different metrics need to be included and assessed as opposed to relying on just one aspect. You do not want to kill off a product that could pick up in the near future.
Impact on the development team
For new products, there is bound to be a load on the development resources – but this is offset by the increased numbers that it rakes in going forward. On the other end of the spectrum, a dying product will be costing your organisation heavily when it comes to maintenance, yet the revenue generation and new customer acquisition is on the downtrend. Look at the number of resources that the development team is putting into the product – from updates and patches, to bug fixes, tests and refactoring. Compare this to the performance of the product in the market.
Baggage on support
As a product approaches the end of its useful life, there will be an uptick in customer complaints. More people will be calling up support and requesting for help with the day-to-day use of the product since the environment which it had been initially designed for has changed.
Will you be breaching legal or contractual obligations when you stop sales of the product? Are there promises that you have made to your customers that will be broken when support for the product ends? Go over the negative implications that this will have on your business.
Since you have already crunched the numbers on the resources that are going into the product in question, how much more value would you get if you redeployed those funds to more products that are profitable? How many resources will be freed up once you retire the dying product, which can be channelled to more lucrative initiatives for your organisation?
There are issues that are specific to different product lines. For instance, if your company manufactures physical products, you will want to consider the effects that discontinuing the product will have on your inventory and channel partners. For those in the service industry, there will be disruptions in operations when transitioning data over to new platforms or websites. With software products, aspects like bug fixes and patch availability, as well as compatibility with future products come into focus when deciding whether to retire a product.
At this point, you will have a picture about how ending the life of the product will benefit your company, like through freed-up resources, or the risks that will come, such as backlash from customers. These factors will help you come to a firm conclusion about the longevity of the product, or whether it should be permanently retired. Once you come to this conclusion, the next thing is creating a road map to follow through.
Step 2: Bring Stakeholders on Board
While the production management team will have the data on why a specific product should be retired, there are more players on the field with whom the issue needs to be discussed. Other departments will be affected when you pull the plug on the product, and the members of the company need to be involved in this decision – especially the executives.
The data collected in Step 1 above will be a key factor here, allowing you to build a case based on reliable evidence. This will aid in winning the approval of the executive staff. With the support and backing of the executives and responsible groups, the road ahead will be much less bumpy.
Ideally, the retirement plan will need to include:
- An executive summary
- Details of the groups that will be affected by ending the life of the product - including departments in the company, resellers, and parties that the company has partnered with to push the product, as well as the customers.
- Alternatives to be considered – Can the product be sold off to another company? Can you spin out a new product from it? Will you opt to continue selling it for some time before permanently shutting it down? Measures like reducing prices to clear inventory or increasing prices to drive customers to the replacement products can be adopted for companies selling physical items. For software products, having "Upgrade Protection" pricing will encourage existing customers to move to the new product. For those in the service industry, you can maintain that old platform or website for the existing users even after you have shut down enrolment or sales through it.
- An announcement plan dictating the process through which the product will be taken through – it includes aspects such as critical dates for the milestones to be met, a plan for the manufacturing process and supply of spare parts, update assistance, and support plans (both customer and tech support), all trough to disposal or recycling guidelines, and even trade-ins.
Step 3: The Curtain Falls
After securing the go-ahead from the executives, now it is time to pull the plug. How do you go about it? This will require a multifaceted approach. Let us break it down:
Working with the sales and marketing team
Right off the bat, you will need to have a candid decision with the sales team since their current presentations will be affected. The focus here is on modifying their strategies and outlook with the product out of the picture.
Go over the marketing materials that are used, and the messages being sent out to the public. Wherever the product being retired comes up, this should be changed and updated with more relevant alternatives and solutions. Coordination is key to ensure that the company is not sending out conflicting messages to its audience.
Informing your customers
That last thing you want is your customers feeling like the rug has been suddenly pulled out from under them. They need sufficient warning about the product being terminated. Otherwise, you can alienate long-time clients, or come under social media backlash for discontinuing the product without warning.
Do not stop there. Give your customers suggestions on alternative solutions – especially the new product you have developed to replace the one being ended. The goal here is to maintain customer loyalty, since they are directly affected by the decision made, and you want them to continue using the products that will be released in future.
Going by industry best practices, there will need to be continued support and warranty servings for a defined period, in order to meet the terms and policies that were stated to customers when they first got the product. Ensure that you have announced the end-of-support date to the customers. When you seamlessly handle the transition from an old product to a new one, it will have a positive impact on your reputation and customer loyalty.
End of sale
Announce the end of sale of the product, then remove it from your catalogue. Also announce the end of support, as Microsoft did when withdrawing support for Windows 7 on January 14, 2020. Marketing programs for it should be halted as well.
Redeploy freed-up resources
Plans can now be put in place to redeploy the funds and human resources that had been held up by the terminated product. For instance, you can dedicate them to reducing technical debt on your other products and increase the capacity of the new ones.