Note: This is the 2nd of a 3 part series of articles by guest blogger Chris Brown. If you feel inspired to write a guest post of your own, click here to find out how to submit it to us.
Part 2: When to kill a product
No one wants to manage a dying product. No one wants to sell, support or, certainly, buy a dying product, either. The role of the product manager includes performing the kill analysis – thoughtful, thorough and completely unbiased – and making a recommendation that is best for the business.
Knowing When It’s Time
When do you know it’s time to kill a product? To make the case, the product manager should demonstrate the product’s performance over its lifetime and build an impartial view of the situation, and then make a recommendation. With the data points listed below presented and analyzed fairly, the decision to kill or not should be obvious, and the recommendation will carry sufficient weight to sway senior managers. (In some instances, a product may be unfairly on the chopping block, in the doghouse, for one reason or another, of senior management or a CEO. Performing this analysis could just as easily demonstrate why a product should be salvaged and invested in, rather than killed or left to slowly die.)
Here are some telltale signs your product is on life support:
Steady decline or flat sales volume or market share. Downward or flat sales volume over a long period of time indicates apathy on the part of the market, the sales team or both, neither of which are good. Apathy for one product can have a negative halo effect on others, which is discussed in more detail later.
Decreasing or flat revenues and/or margins. Lower/flat sales volume shouldn’t be the lone factor in a kill decision. Perhaps your product’s audience, to quote “Spinal Tap,” has become “more selective.” No problem: If a product is specialized and valuable enough to that audience, revenues can continue to climb based on price increases. But if the market is unwilling to accept a price increase and volume is in decline, then you’ve got a kill situation. This is why margins should also be analyzed. Products become more profitable as they reach economies of scale (products typically have lower margins in the launch and growth stages, and higher margins as the product reaches maturity, assuming steady volume growth). Tight margins, especially well after launch, indicate that the product may never reach the scale it needs to be truly profitable in the long term.
Lack of investment. Products that are on their deathbed often get ignored during budget cycles. This is not by accident, and can be a self-fulfilling prophecy, but is often a telltale sign that the organization has lost interest.
Over-investment. The converse of products that consistently get no budgetary love are the money pits, the ones that suck resources but see no return on investment. Again, the decision to kill these products tends to be a little easier, yet expensive-yet-poor-performing products can inexplicably live on. If high direct costs are the problem, you’ll see this in your margin analysis. But other costs, like ongoing technical, marketing and customer support, may take more effort to ferret out.
KPIs are in the dumper. This is important. Every product has a set of key performance indicators (KPIs) or metrics, other than sales or revenue, that measure success. These can be customer satisfaction scores, usage statistics, conversion rates, etc. Sometimes a product can have very strong KPIs, but slow sales. This could mean you have a marketing or sales channel issue. Ambiguous or conflicting KPIs may indicate a positioning – or even tracking – problem. In either case, the product may just need some tweaking or new messaging. But if KPIs are and have been in a steady state of malaise, then consider it a bad sign.
Strategic misalignment. Strategies can shift from year to year, and a product that was aligned with a strategy when it launched may not be in line with current strategy. Or, it becomes clear that the product was never able to deliver against the strategic direction, even if that direction has not changed. Either way, if your product is not delivering key strategic objectives, then it only becomes a distraction. (This will be obvious in your KPIs, which should be aligned with strategic objectives.)
None of these in isolation should serve as a reason to shut down a product. Even together they should be utilized as a basis for discussion of whether or not to go down the path of sun-setting. A product’s KPIs could be in the dumper, for instance, because the product is lacking key functionality, which it can’t have without investment, but no one wants to invest because sales are down, which perpetuates the above mentioned self-fulfilling prophecy. You’re better off applying these criteria to a grid, like the one below, and using this as the basis for a deeper analysis.
The table will serve as a guide, but each of these areas should be fleshed out with data and analysis by the product manager.
In addition to these data points, present information that (hopefully) already exists, primarily a market analysis (who makes up the market for this product and how has it shifted, and what are competitors doing?) and an updated roadmap (features and enhancements necessary for product growth, and the level of investment needed to build these features). Combined this information and view it through a clear lens, and the right direction should be obvious.
– Chris Brown
Chris is vice president of product management at Apartments.com, a division of Classified Ventures, LLC. Email him at [email protected] or follow him @Brown784
Coming up:
Part 3: How to kill a product.
How do you kill a product? You’ve made the decision to pull the plug, now follow these steps to ensure a smooth sun-setting process.
Previously:
Part 1: Why you should kill a product.
If it’s generating some revenue, even a little, why kill an underperforming product? Because ineffective products divert focus and resources from core and growth products, and ultimately dilute the overall value proposition of the business.