When to Discontinue a Product Line
Every successful product will go through various stages in its lifetime; Introduction, Growth, Maturity and Decline. When the majority of products in a product line reach the late ‘maturity’ or early ‘decline’ phase, the product manager can do either of the two things. He/She can either decide to launch a new version of it or just discontinue and withdraw it from the market. However, deciding when exactly to discontinue a product line is a tricky matter.
There are several factors to consider before actually discontinuing a product line. It is important to analyze the performance of the product line as a whole as well as the performance of the individual products within that product line.
Profit: A product line may have been around in the marketplace for many years and have been profitable in its initial and growth stages, however, that does not guarantee that it will be so indefinitely. If managers keep continuous track of a product's financial performance, they may discover that its sales and profitability decline over time, sometimes at a very rapid rate. This is the time managers need to start analyzing other factors to see if the product has any positive effect on the business. If it is discovered that the product's only benefit is income, which is no longer coming in, managers may go ahead and discontinue the product.
Resource Utilization: Even if a product line is profitable, it may just drain your resources for very little benefit. Ensuring that resources are utilized by all your product lines optimally is very important. Managers should analyze the margin, overhead cost, labor cost, maintenance cost, marketing expenses, etc., that are spent to keep a product line running. If a product line merely absorbs resources in exchange for minimal return, then it may be better to eliminate it and pave the way for other product lines that can utilize input resources more effectively.
Product Mix: Managers should constantly assess whether the company's product lines have the right depth and breadth to satisfy their customer's needs. It is easier to drop a product line if there is a wide enough product mix, since other product lines will help retain current customers and potentially fill the gap of the dropped product line. While discontinuing a product line, managers can also increase the breadth of other product lines to retain current customers.
Brand Image: Market turbulence never lets a product line succeed for long unless it is continually improved. Every brand needs a makeover eventually. It is important to recognize if a product line no longer fits your brand image. Managers may have to discontinue a product if they can’t take the risk of spoiling the company's overall brand image.
Customer Demand: This is an ever changing factor and the most sensitive and important one to consider when deciding whether or not to continue a product line. If a product line no longer appeals to customers, then it has no value in the market and also in the business. In this case, managers should discontinue or shrink a product line in order to make room for other, more successful lines to flourish. An increasing return rate of products from either retailers or customers could be one tell tale sign of when customer demand is waning. Other indications could be less favorable reviews on eCommerce sites or the need to drastically increase advertising spend to maintain customer demand.
If the answers for most of these criteria turn out to be negative, then managers can be sure that they should discontinue a product line in order to have a positive effect on their business. If some of the criteria seem positive, while others are negative, this decision could be much harder. In these cases it might be helpful to build a cross functional team across departments to assess from various vantage points what to do about the product line.