When is it OK to kill a product?

Does your company struggle with product life cycles? Some products make it easy to exterminate them. They get a tepid welcome in the market, produce little sales and/or are difficult to sell. It gets difficult when these product produce a decent amount of revenue – say 10% of your company’s gross income. In more difficult situations, these products may turn a profit, but it might be hard to find.

All of the sales, marketing and intellectual effort combined to keep the product alive can match or even exceed its revenue – making the decision seem easy. If there are multiple products in that situation and several of these products aren’t in the early part of their life cycle, you have work to do and revenue to replace.

In a manufacturing or assembly situation, there is inventory, equipment and floor space to consider, much less the potential lost opportunity cost of the space and funds being consumed for this product. When it comes right down to it, it’s hard to cut yourself off from that 10% of gross revenue.

If the product is profitable, we might only be talking about two or three percent of your profit. To a company with profit all over the building, the decision is probably easy. To a company losing five to ten percent of revenue, it means going in the red, even if only for that year. The repercussions of that loss can be more serious. There could be tax implications and possible impacts on lines of credit, etc.

Given all these considerations, how do you decide when a revenue-producing product’s life cycle is over? No one ever said this would be easy.

What makes it easy to kill a product?

I suspect I can get easy answers from your team about products they’d love to get rid of. The answers will sound something like this:

  • The product requires a difficult on-boarding, ramp up and/or installation process that customers don’t enjoy.
  • It’s difficult to pay a sales commission on the product, making it less attractive to the sales team, which makes it harder to sell.
  • The product requires substantial ongoing support or customer service.
  • High maintenance and service costs and related downtime make the product value harder for clients to realize.
  • The product attracts the worst kind of clientele. “Worst” from your company’s perspective, not mine.

You may have other reasons more specific to your situation.

What makes it hard to kill a product?

A better question might be “When is it not OK to kill a product?”

You can find any number of books, courses and strategic direction documents on how to manage a product life cycle. You may be an expert at managing a product through its life cycle. Even so, there are reasons why you wouldn’t want to kill a product that would normally get the ax for overhead or other financial reasons.

A few answers come immediately to mind:

  • When the product consistently attracts new customers who historically have a high LTV (lifetime value – ie: the revenue gained on average per customer), even if the value is usually delivered by another product.
  • A substantial percentage of the product’s customers ascend your product ladder.
  • The product acts as an add-on to your higher-end products.
  • Deployments of this product are an essential component of your product platform or ecosystem.
  • The addition of this product, however trivial, makes your overall offering unique and/or as a whole allows it to create much higher value than competitive product platforms.
  • This product attracts customers who can be described as ideal takeaways from your competition. I’m not a big market pie slicer (vs. expanding the size of the pie), but this is different. Ideal takeaways are the clients that you would cherry pick from your competition, if you could choose.

Bigger picture considerations

Before you kill a product, make sure that you’ve looked at it holistically, in other words – in the context of the entire company, strategy, market and the life cycle of your client community.

Does the product fit your overall strategy? Do the product’s clients fit the profile of clients you want and need? If the product still seems wrong when considering those two items, you may find that your overall strategy and/or client profile requires re-examination. In an extreme case, the “bad product” might be telling you that the market has changed and that it’s time to “fix the company”.

Photo by oneiric wanderings