Usually, when a product manager takes a decision to kill a product, service or a segment we assume that a proper analysis must be in place on financial, organizational and strategic factors. This means such products are at the end or at least towards the end of their life cycle. In other words the key performance indicators (KPI) of the product are not healthy. Would you be surprised, if I say that a decision of killing a product should not only depend on the product KPI but also on the business objectives? Rather, a business objective is bigger than the KPI of a product. This means, product managers could often take a decision to kill even their performing products.
So, when is the right time to kill a particular product or service? Based on the observations made on fall of various products in various industries, I have categorized the reasons to kill (or save) a product in three broad parameters which need to be assessed before taking a final call. The notable thing is that the sales and revenue of a product is the part of the first parameter only which may not be appropriate if considered as only parameter. The three broad parameters are:
Product KPI: This is the most visible parameter and product manager often get carried away with the observations made in this category. Declining sales, declining market price because of competition and declining market share are the reasons enough to believe that the product is at the end of its life cycle. In some advance analysis, increasing input cost of the low KPI product can also be considered as the reason.
Brand KPI: We often fail to asses performance indicators of brand while making an assessment of product performance. Brand image especially in the segment in which a product is in question, representation of company in the category and level of customer satisfaction. If you have low brand KPI, it is very difficult to find the root cause of low product KPI. One of the easiest measurements of brand performance is the change in working capital of all the channel partners. If it is declining, it is even more dangerous for a company than the performance of a particular product.
Business Objective of the company: I assume that most of the companies are rational enough to think for a longer term. Short term fluctuations in sales, country’s economy and business environment should not alter the business objectives set for a longer period. Before taking a call on a product company must evaluate the alternatives, alignment of alternatives to company objective and foreseen changes in technology. Driven by business objective, there are companies which replaced their performing products with new innovative and differentiated products and offerings.
Any one or more than one strong observations from the above parameters can be a trigger for a removal of a product from the portfolio. All I suggest is to analyze all three before taking a call. Beware of the fact that some times, a symptom can divert you from the root cause.
One thought on “When to kill a product?”
This is well said. But killing a product or service is a matter of great courage, as there is already a stream of revenue linked to it. A company that takes such decision should also have a robust plan to fill the gap created by the old product. It could be very detrimental if the new product doesn’t take off. Some companies have exhibited great skill and expertise at replacing old products, no doubt they are category leaders.