In my previous article, I delved into the importance of adopting a customer-centric approach when navigating business or product transitions. This topic sparked a captivating discussion with a reader, inspiring me to explore the perspective of organisations and management. It’s important to note that not all product transitions are unfavourable; some are prompted by superior alternatives, regulatory changes, or technological advancements, often offered by the same company.
This article serves as a prelude to the previous one, focusing on businesses and organisations grappling with various challenges. Many individuals may not recognise the signs indicating the need for a transition or when it’s time to pivot before it’s too late. Thus, I aim to shed light on key indicators that suggest the necessity of transitioning a product or service.
In the ever-evolving landscape of business, making tough decisions is par for the course. One such decision that is usually difficult for businesses to make is whether to discontinue a product that’s underperforming financially. Although bidding farewell to a product can be emotionally taxing, recognising when to do so and executing the discontinuation adeptly can be pivotal for an organisation’s overall health and success. In this article, we will explore the criteria for deciding when to say goodbye to a product and the best strategies for managing this process.
Indicators it’s Time to Discontinue a Product:
- Declining Sales: Perhaps the most obvious sign is a consistent and substantial decline in a product’s sales. While belief in an idea is commendable, if a product is consistently unprofitable, has never been profitable, and shows no signs of revival, it’s time to contemplate its future.
- High Production Costs: When a product’s revenue falls short of its production costs, it’s no longer financially sustainable. This includes both direct (materials, labor) and indirect (storage, marketing) costs.
- Market Saturation: If the product’s market is oversaturated, and gaining a competitive edge becomes increasingly challenging, a graceful exit from the market might be the best choice.
- Shifting Consumer Preferences: Changes in consumer preferences or technological advancements can render a product obsolete.
- Limited Growth Potential: If a product has reached its zenith with no untapped markets or avenues for growth, reallocating resources elsewhere becomes a sensible strategy.
Now that we’ve identified the red flags signalling the need to discontinue a product, let’s explore the best practices for managing this process. While my previous article emphasised a customer-centric approach, there are other facets that warrant careful handling.
Effective Management of Product Discontinuation:
- Transparency: Transparency is paramount and often where many organisations falter. Open and sincere communication is essential. Inform partners, clients, and employees in advance, expressing gratitude for their support and elucidating the rationale behind the decision.
- Customer Support: Extend the right support to those who invested in the product during the transition. Provide alternative solutions or aid in locating substitutes.
- Inventory Management: If there is existing inventory, manage it efficiently. Consider offering discounts or promotions to clear remaining stock.
- Employee Transition: Address the impact on employees connected to the product, whether directly or indirectly. If possible, explore options for reassignment or retraining. In cases where layoffs are inevitable or the business is closing, transparency is once again crucial. Keep your employees well-informed.
- Market Analysis: While not always feasible, particularly in cases of business closure, consider conducting a comprehensive analysis of why the product failed. Use this as a learning opportunity to avert similar missteps in the future.
- Resource Reallocation: Redirect the resources, be they financial, human, or technological, that were previously allocated to the discontinued product toward more promising ventures or innovations.
- Learn and Adapt: Utilize the experience to refine your decision-making processes. Continuously assess your product portfolio to spot and address underperforming products sooner.
In conclusion, deciding whether to discontinue a product can be a challenging task, but it is essential for an organisation’s long-term sustainability. Identifying the warning signs that a product is no longer viable and managing the discontinuation process with transparency and care is crucial. Moreover, viewing this process as an opportunity for learning can lead to better-informed resource allocation and decision-making in the future. Ultimately, a well-executed product discontinuation strategy can be a pivotal step toward the long-term success of your business or future endeavours.
