Sunsetting a product: Get Data

As a Product Manager, one of the efforts that we are often asked to consider is the decommissioning or sunsetting of a product or platform.  It is not always a fun task, but it is very important to the business.  This blog series is dedicated to the steps that a strong Product Manager needs to consider when researching this kind of issue.  The first and most important thing to do is to get data.

If ever there was a project that should NOT be executed based on gut feel, this is it.  You need data to make sure you make the most sunsetprudent decision possible.  There is no way to sunset a product without upsetting some aspects of your business, so this is not something that should be taken lightly.  What kind of data do you need?

Customer Analysis:

You need solid data from the financial and CRM systems of the company to answer the following questions:

  1. How many customers are impacted?
  2. How important are those customers?
  3. What other services have they purchased?
  4. What prices are they paying?
  5. What is their lifetime value?

The first question is obvious and would certainly be taken into consideration by nearly everyone.  The other questions are where you will find valuable information.  I have worked on several sunsetting or decommissions projects and when we completed this stage, we always found interesting data to inform our decision.  In one example, we were a B-to-B telecommuncations company that had inherited a residential base of customers from an acquisition.  We did not want to be in the residential business so we wanted to sunset the residential product.  The data told us that this base of customers was paying far above market rates for the services they were receiving.  When we ran a margin analysis (more on that below), this was an extremely profitable business and the last thing that we should do was take any action that might cause churn.  We presented this to senior management and we quietly closed the project.  In another instance, we had product offering through an acquisition that was not strategically aligned with our business goals.  When we analyzed that customer base, there was no overlap with our target customers, so we decommissioned the product completely.

Analysis of Alternatives

Once you understand the impacted customers, you need to determine the available alternatives.

  1. Are you providing a migration path for existing customers? Do you have another system for them to go to?
  2. Is this customer base valuable?  Could you package and sell the service and customers to a 3rd party?
  3. What is the competitive landscape?  Will your competition use this effort against you with your existing customers and prospects? Or is there a competitor that you actually want to point the customers towards?

It is important that you think through all of the different disposition options.  Turning off a service with no option for existing customers but to find another provider can be a risky move – but it might be the right move, depending on the circumstances.  If you want to keep existing customers but you need them to migrate to a new service or platform, that can be equally risky and you have to provide adequate short-term incentives to make it worth the effort/pain for the customers.  There is no single right answer as each product, company and customer base is going to be slightly different.  That is why having comprehensive data is so important.

Understand the Margin

This is where many product managers can lose sight of the mission.  It is critically important to understand the revenue that will be eliminated by sunsetting a product and that typically comes as part of the Customer Analysis.  What is often less understood is the cost side of the equation.  In many instances, non-strategic products and services are an annoyance to Senior Management.  They are a messy footnote on the annual report and the C-suite just wants them gone.  A good product manager is going to be disciplined and data-driven with her recommendation.  Many legacy products cost little or nothing to maintain.  Before you disagree, let me explain.  Let’s consider the scenario where you have a version of your software in one code base and you have subsequently released the next generation of this product is a more up-to-date, robust and flexible software language.  The customers hanging around on the old software are irritating because it is one more thing to think about.  But if you have chosen to cease development on that platform, your maintenance costs might be quite low.  Now, if you are paying a vendor or the hardware costs are significant, then those factors should absolutely be part of the margin analysis.  But many times, there is no new development on the legacy product or platform and no (or very few) resources dedicated to maintenance; there are only a limited number of service calls and the revenue is decent.  If that is the case, then perhaps sunsetting the product is not the right approach.  Maybe you just let sleeping dogs lie.  But whatever you decide, it needs to be a decision based on data, not guesswork or assumptions.

Sunsetting a product or platform can be a compelling and strategic initiative for a company and it is important that it is taken seriously by Product Management.  It usually is not as sexy or as fun as launching a new product, but the impact to the company’s bottom line can be significant.  You just have to make sure you have the right data and thorough analysis to make the right call.  Please look for companion blogs on the Communication Plan and Pricing considerations.

 

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