Every product that launches into the market goes through four stages of the product lifecycle: introduction, growth, maturity and decline.
When the product reaches the decline stage, profitability will start to fall until it is no longer commercially viable to continue production, and it will most likely be discontinued.
In some cases, the original product will be replaced, either by a newer version with updated features or design style, or perhaps by a brand-new product. Car manufacturers, for example, update models every few years. The name continues but the older models are phased out, replaced by newer versions with updated technology and more modern designs. Eventually the model may be discontinued to be replaced by a brand new model e.g. Ford Escort – Ford Focus.
While the span of each product’s lifecycle is unique, (some tend to spend more time in the maturity stage), they will all eventually reach the decline stage. There may still be some core loyal customers, keeping the product afloat, but overall demand will continue to fall.
Think back to products that used to be popular; cassette players, typewriters, video recorders, even the Nokia 3310 (remember those? 😊). They will either have a very small production run now or will have ceased production completely. Eventually only second-hand products will be available, perhaps cherished by enthusiasts and collectors.
WHY DO PRODUCTS DECLINE?
Decline is a natural part of the product lifecycle. Typically, when a new product is launched, it will be expensive to manufacture and therefore expensive to buy. As demand grows and production costs fall, competitors will start to sell rival products and the marketplace will fill up. The product will experience a period of growth followed by maturity.
There are several factors that may cause a product to decline, such as saturation of the market or the introduction of more innovative products, which will lead to a fall in popularity.
Some companies will try to keep a dying product alive for as long as possible – clearance sales, special deals etc, but this is simply delaying the inevitable as the product will continue to lose market share until it doesn’t make commercial sense to continue production.
HOW TO SPOT IF YOUR PRODUCT IS DYING: 8 SIGNS
1. Customer interest decreases
The interest in the product will fall – less chat on social media, fewer calls and email enquiries.
2. Competitors are launching ‘me too’ products
Competitor products will be launched that imitate the original. Production may be moved to the Far East where it is cheaper to manufacture.
3. Market share reduces
Competitors with newer products are stealing market share from you.
4. New technology launched, product is outdated / unsupported
The product will be unsupported by new software which will affect performance and customer satisfaction.
5. Product is only bought by loyal or existing customers
Demand from new customers will fall, the product will only be bought by existing customers.
6. Necessity to drop price to garner any sales
The only time sales are made is when the price is reduced, which will eat into any margin made on the product.
7. Decrease in marketing spend
Advertising spend will be channelled towards other products that provide a better return on investment (ROI).
8. Production / supply chain costs increase, while sales do not
As demand falls for certain components, it may be more difficult and expensive to source them. If you notice production costs are going up, yet sales are going down, it’s because the product is declining.
WHAT TO DO IF YOUR PRODUCT IS DYING
Before a product reaches the decline stage of the lifecycle, the next generation product should already be in development. This is especially important if you operate in an industry where new technology is regularly released. Ideally, you should be working to a rolling three or five-year roadmap, with all future product launches mapped out.
Working on the next product development will ensure that your business and its products are always in demand, and keeping up with competitors to protect (and increase) your market share.
However, if your next generation product is delayed, there are some ways you can exploit the existing, dying product to generate some more sales – think of it like using a defibrillator on your product to restart its heartbeat.
Photo credit: Unsplash
1. Reach new customers
You can try to revive the existing product by attempting to reach new customers, for example by using different marketing channels or platforms. This may require some advertising spend, but online advertising methods can be excellent value for money, and the payoff in extra sales may make this a worthwhile exercise.
2. Rebrand or redesign
You can redesign the existing product and launch it with new and improved features. Rather than developing a new product, a redesign of the existing model could be a quick cost-effective solution to boost sales for a short while. Rebranding the product may also boost demand temporarily. But ultimately, unless significant updates are made, you are delaying the inevitable.
3. New product development
Ultimately, the only option will be to develop a new product to replace the dying model. This is the most expensive solution, but it will have the most long-term benefits, and is essential if your business is to continue growing market share.
When you start developing a new product, it’s essential to conduct market research amongst your target audience. Look at reviews and feedback of the declining product. What do your customers love and hate about it. Invite some of your loyal customers to offer honest feedback via surveys and focus groups. And invite people who are not your customers, too. It’s just as important to hear what they have to say – how can you turn them into a customer?
Once the research is conducted, you will have an idea of the essential and nice-to-have features for your product. You will also know the price point that customers are willing to pay. You can then start developing a product that meets the needs of the target customer at the price they are willing to pay. During this process you may discover that some of the nice-to-have features are not commercially viable and will have to be dropped for this particular product.
We work with our clients to ensure thorough market analysis is conducted for all new product development – which also includes researching and comparing competitor products.
If you’re ready to start your next product development, get in touch with our team today.