Chapter 16
Retirement: Replacing a Product or Taking It off the Market
IN THIS CHAPTER
Understanding what product retirement is and why products need to be retired
Plotting elements of a product retirement plan, including special product situations
Taking some product retirement pointers
Retiring a product (often called end of life) occurs when a company decides to exit the market. Sometimes companies make this decision strategically after much thought. Other times, a product may have failed miserably or died out over time, and it becomes obvious that it’s time to stop selling it.
Retirement can involve completely pulling the product from the market without replacing it or, in many cases, replacing it with a new version. Products may be retired for a variety of reasons, such as technology changes that make the product obsolete, competitive pressure that make the product no longer viable, or the product simply can’t meet the required revenue or profitability thresholds.
Retirement is an area of the product life cycle that companies often ignore. Yet keeping products around that aren’t profitable can cost a company a lot of money. Retiring products and determining how best to maximize the corresponding profits isn’t glamorous. In fact, most of it is tedious checking and re-checking to make sure that some aspect of retiring a product hasn’t been forgotten. However, it’s a necessary component of product management. This chapter details why the retire phase is important and how to set up a cohesive retirement plan.
Deciding How to Retire a Product
A lot of thought needs to go into how to retire a product because retirement impacts certain departments, programs, and resources. Customers may have expectations about how long you’ll continue to sell and support the product, and if you retire it the wrong way, you can damage your brand or your relationship with them. Retiring a product requires a lot of internal company communication as well as external communication with customers to ensure that expectations are set and met accordingly. Think of it as a launch plan in reverse.
Spend the time planning retirement. Don’t do it on a whim or without thinking things through. If you’re going to be replacing the product with a new version, make sure you plan the old version’s end of life at the same time you’re planning the new version’s launch because they’ll be highly dependent on each other.
Taking into account internal and external expectations
When retiring a product, you need to look at two distinct points of view:
- Customer side: Who buys it now? How much revenue is dependent on selling this product? Is it related to another product such that this product’s removal will cause issues in selling the other one? Your sales and sales operations people are critical to getting this part right. Spend the time to explain the thinking and then give them enough time to break it to their customers and gracefully address the outcome.
- Operations side: Looking at product retirement from an operational point of view as a product manager is completely different. For example, say you’re selling only ten units a month of a particular product and should retire it. However, you still have 20,000 units in a warehouse. Scrapping all these units will cost the company $1 million. Your task is to discuss with finance the cost of storage versus price reduction options versus the cost of scrapping. This way, you’re giving your company options and a well-rounded view of how to exit the product from the market.
Considering Critical Factors in a Product Retirement Plan
When developing your end-of-life plan, keep the following critical factors in mind.
- Loyalty: How will you maintain customer loyalty?
- Negative implications: Do you encounter any legal or contractual implications if you stop selling the product? Have you promised customers anything that you won’t be following through on?
- Financials: Is this product still profitable, or are you losing money on it? If it’s profitable, is it worth the opportunity cost of spending resources to keep it on the market, or would these resources be better spent on something newer that may have more growth and profit potential?
- Physical concerns: If it’s a physical product, what are the ramifications of discontinuing the product in terms of inventory, channel partners, returns, or customer replacement and support?
- Risks: Are there any other risks associated with discontinuing this product, such as alienating longtime customers or possibly creating a backlash on social media if customers are unhappy that you have discontinued the product?
Breaking down specific end-of-life issues by product type
Not all types of products have the same issues during the retire phase. Here are a few specific issues to look out for depending on the type of product you’re retiring.
Physical products
Physical products don’t magically go away after you issue an end-of-life notice to your company, customers, and channel. When discontinuing a physical product, keep these concepts in mind:
- Closely manage inventory in the pipeline. Your channel partners often have agreements that allow them to return unsold inventory after a certain amount of time. You may also have a few units in a far-off warehouse. Make a list of every unit you have and decide what to do with it: sell, save for service needs, or scrap.
- Reduce price for excess inventory. For those few units in some forgotten corner of a warehouse consider reducing the price dramatically to encourage sales on a non-returnable basis.
- Increase price to drive customers to replacement product. This no-holds-barred solution is great for getting people to move to a newer product. Increase the price of the existing one, and then consumers will beg you to move to the newer version.
- Maintain spare parts availability. Always, always find your service manager and ask how many units that department will need for service requirements. Service managers have a magic formula known only to them that tells them that if the company sold x units over y years and needed to repair one percent of them, then the service department needs to keep z units in reserve. Transfer that many units to their department and say, “Thank you.”
Software
Software products have their own unique set of issues. Since there is rarely a physical package that the customers purchase, inventory issues are usually minimal. However, many customers will continue to use the software products for many years, and things like how long support will be provided for the retired version must be determined. Here are some additional considerations:
- Waiving new-product costs for recent purchasers: If you’re a business to consumer (B2C) software provider, you can’t tell your customers that you’re introducing a new/improved product in the next month. Those who just invested in the current version aren’t going to be very happy. Instead, you give the customers who purchased the software in, say, the last three months the new version for free, providing them with what’s known as upgrade-protection pricing. Business to business (B2B) customers are often protected by contracts which give them the right to upgrade at no cost through their support contract.
- Working with developers to support the existing product: If you have (loyal) external developers who build on top of your software, ensure that you can give them bug fixes and patches to known issues for a certain amount of time after the new version becomes available. Make sure to specify how long you can reasonably give them to make the transition. (Two days, for example, is too short a time.) This task shouldn’t be difficult; as part of your end-of-life plan, you would’ve asked your developers how long moving to the new version would take and incorporated that information into your plans.
- Ensuring compatibility with prior versions of the product: Nothing is more annoying than having created a document in one format and then being unable to open it when the new version arrives. Make sure that the new and old versions provide compatibility with each other so that you don’t upset customers. It’s time consuming to spend development time on, but without it, you’ll lose customers quickly.
Services
Retirement of services also has its own unique challenges. Following is a list of additional considerations.
- Downloads and technical information: A few years ago, we checked out products that we’d launched ten years before. To our surprise, the software downloads and support materials were still live. The actual company had been sold off, but the website still supported customers many years after the last units were sold. Plan to maintain old service databases or websites for existing users long after sales or enrollment has stopped.
- Data continuity: Every few years, a company will migrate to a new database or website. Remember that farsighted product managers arrange to transition the data and information over to the new system. We have been pleasantly surprised by a retailer who kept our data (and discounts) live for over ten years. Our loyalty will long remain with this company.
Distinguishing a product’s various end-of dates
The discussion about end of life often seems like it’s just one fixed date in time, but the reality is that a product has many end-of dates. The last day the product is sold isn’t necessarily the last day it’s serviced or supported. When developing your plan, make a list of all these end-of dates and estimate how much notice you need to give for each step. Microsoft, IBM, and Cisco are organizations that clarify the end-of schedule extremely well. In fact, most large companies have written policies so that customers are crystal clear on what to expect. Table 16-1 spells out what each end-of date represents.
TABLE 16-1 End-of-Life Date Terminology
|
Term |
Definition |
|
End-of-life (EOL) announcement date |
Day company notifies customers that a product will be retired |
|
End of sale |
Day orders are no longer taken for a product |
|
End of build |
Day a product is no longer manufactured |
|
End of contract |
Day company no longer supports a product except by time and materials (if available) |
|
End of service (also known as shutdown) |
Day service is no longer available because technical or maintenance service contracts have expired |
Checking out parts of a product retirement plan
A product retirement plan has many sections. Check out Figure 16-1 for an example of the components of a product retirement plan. Because the retire phase offers many options, you may not actually need to fill each and every section.
© 2017, 280 Group LLC. All Rights Reserved.
FIGURE 16-1: Components of a typical end-of-life plan.
Check out the 280 Group Product Management LifeCycle Toolkit (included as a free download with this book; see the Introduction, page 4, for details) for an end-of-life plan template.
Following Best Practices when Retiring a Product
There are a number of best practices to be aware of and implement when deciding to retire one or more products:
- Consider creating a standardized end-of-life process so you can minimize and more easily predict the impacts to different groups within your company and to resellers and customers.
- Communicate early and often so that stakeholders know what to expect when.
- Get the support and backing of all responsible groups and executives well beforehand so that things go smoothly.
- Plan for continued support, warranty servicing, and so on for a stated time period to meet your stated policies to customers.
Make the retirement phase of a product just as important as the launch phase. When you successfully retire a product by keeping to a plan, you keep internal groups and external customers updated and happy.