The Grand Finale! What To Do With A Product In Decline? (Product Lifecycle Part 5)

Key strategies include:

• Prioritising profitability by cutting costs and focusing only on essential functionality
• Retaining loyal customers by understanding what keeps them from switching
• Planning customer migrations to newer products well before decline becomes urgent
• Exploring exit options like selling off valuable parts or shutting down at the right time

With the right approach, even declining products can continue delivering returns for years. For Product Management teams in Australia, this stage requires careful, respectful planning — not panic.

This is the final part of our five-part series exploring the product lifecycle, where we delve into the product decline stage. If you haven’t yet, check out part 4 of the series for tips for managing a mature product.

As the name suggests, in the decline stage of the product life cycle, your product metric starts to decline. While in maturity, growth is sluggish or flatlining, it is only once it starts to reverse that a product should be considered in decline. Once a product has entered decline, it is generally too late to move back to growth. It will enter a downward spiral that will eventually require an exit from the market. Decline is usually slow for most successful products, taking years if not decades. It takes a long time for a loyal customer base to move on; however, it will be short if there is very rapid customer attrition (e.g., from reputational issues) or a significant rise in costs.

This stage requires careful planning and strategy — particularly for those leading Product Management in Australia where market shifts, regulation and customer loyalty patterns can differ significantly.

The goal of the decline stage is to find a way to maximise the value that can be obtained from the product before it is removed from the market. Effective financial management is crucial, along with the pursuit of exit opportunities that can generate value, such as a potential sale. If a product cannot be maintained profitably and no alternative options exist, it must ultimately be withdrawn from the market to alleviate the financial burden of its upkeep. Below are some common options to maximise the value of a declining product.

Managing For Profitability

Products that will soon be retired need prudent financial management, because you can’t count on future growth to recoup any current losses. Profitability is the name of the game in decline. As declining products have typically exhausted all potential customer and revenue growth opportunities during their growth and maturity phases, sustaining profitability often requires a stringent focus on cost management.

To maintain profitability, declining products need to:

1. Identify low-value areas of the product for retirement: Ideally, declining products will remove any costly features or processes that are not essential for customer retention (value proposition). This allows for the most valuable areas of the product to be maintained for customers while retiring areas that are of low value.
2. Limit or halt further investments to ‘keeping the lights on’: It is unlikely that any new product development investments will be recouped in a declining product, so these must be limited. As the product still has customers, investments in maintenance or ‘keeping the lights on’ will still need to be made, but new features or other investments unlikely to deliver returns within a short time frame should be limited.
3. Reduce operational costs: This may mean smaller or non-dedicated teams, lowering of product service levels or looking at moving to self-service touchpoints for service.

To ensure profitability for a declining product over the years and decades, it is essential to retain the existing customer base. While there will be gradual customer attrition, limiting the rate is essential. If not already done in maturity, one area of managed investment should be in churn management processes to drive retention.

While in growth and maturity, investments in new feature development may be key to customer growth and retention, in decline, retention mechanisms are more restricted. Unlike the prior two stages, where you are still likely to be acquiring new customers to create returns for product development, in decline, you are unlikely to be winning any new customers. Therefore, it is hard to justify new features when the costs of development cannot be recouped over the years by a growing product.

Understanding why customers choose to stay with your product is crucial, especially in a competitive market. Customers who remain loyal have compelling reasons for their choice, and identifying these motivations is essential for safeguarding your value proposition.

A significant factor contributing to this phenomenon is the resistance to change, often referred to as change aversion. This tendency is particularly pronounced among the late majority and laggard segments of customers. If significant change aversion exists in your loyal customer base, it is essential to ensure the ‘pain of change remains greater than the pain of the same’. This also makes significant changes to the product ill-advisable if your customer base is change-averse.

Deep discounting can sometimes be seen for declining products. This is at best a short-term cash grab, not a longer-term way to maintain profitability. Winning new customers is hard for declining products, as most of the customer market will be tapped out and even if customers are won with discounts, they are unlikely to be retained, and hence the cost of acquisition of a discounted customer may never be recouped. This tactic is best reserved for products with a one-off purchase where discounted prices will still recoup any costs immediately – e.g., merchandise products.

Although a declining product may appear to be in a dire situation, it’s essential to recognise that it often retains a dedicated customer base that has derived significant value over the years. Many such products thrive due to the unwavering loyalty of these customers. If managed wisely to ensure profitability, they can continue to exist for many years, or even decades, despite a reduced clientele. Additionally, companies might consider transitioning their loyal customers to another comparable product as a viable strategy.

Migrate Customers

A customer migration strategy for a declining product requires a long-term view, as a product must be developed (or amended) to meet the specific needs of the customer segment. In addition, if change aversion is a significant issue, enough time and preparation need to be given in managing change with these customers to ensure they are retained. This is why it is so important that any plan for customer migration starts before a product is in decline.

Customer migrations ensure that while a product may eventually be exited, the value of those customers is maintained in the business and can even be grown over time on the new product. This is why customer migrations can be one of the most powerful strategies for a business when done right. Migrated customers are generally more loyal to the brand than new customers, have low (or no) acquisition costs, and, if the product is similar enough, lower customer support costs.

Various customer migration strategies can be undertaken, including:

• Benefits-based migrations: Migrating customers willingly with greater benefits (and usually no downsides) to the new product. This is a natural ‘win’ for the customers.
• Offer-based migrations: Migrating customers with limited time offers – e.g., discounts or free trials of the new product. This can be used if there are some downsides or if the product needs to be tried in a lower-risk environment for the customer.
• Forcible migration: This should be the last resort and involves migrating customers forcibly, as support or availability will be ended for the previous product.

One example of a very successful customer migration strategy was from Apple with the migration from iPod to iPhone. This was a process spanning almost a decade. While Apple stopped reporting the iPod as a separate revenue category in 2014, it was not until 2022 that they officially discontinued their last iPod offering, the iPod touch. This was an example of a benefits-based migration and was largely driven by customer choice to move as the iPhone offered significant benefits and little to no downsides to the iPod by the end of the migration.

Customer migration requires a suitable product that has a similar value proposition. Once customers have been successfully migrated, the declining product can be exited. If a declining product cannot be profitably maintained or if customers cannot be migrated, the only other options are to sell valuable parts of the product or to exit it without a value retention strategy.

Sell Or Exit

The sale of a product is most likely if it is profitable or if parts of the product offering are highly valuable, like intellectual property. The sale of a product or parts of a product offering allows for the business to receive some partial value for its long-term investments and to remove any ongoing costs. One example is the acquisition of Fox’s entertainment assets by Disney, which left Fox’s sports and news broadcast assets to be managed as a separate corporation.

In situations where no alternatives are viable, the final course of action may involve withdrawing a product from the market without any expectation of value recovery. Although this decision eliminates the possibility of gaining further value from the product, it does relieve the business of the financial strain associated with sustaining an unprofitable item. Ideally, this exit should occur before the associated costs escalate to an untenable level, as those expenses will not be recoverable.

Focus Areas For Declining Products

In the decline stage, the primary objective is to develop a strategy that maximises the product’s value, especially its profitability, while avoiding any additional costs that cannot be recovered.

This means it is essential to:

• Manage costs to maintain profitability: This means retiring low value elements of the product, lowering operating costs and retaining current customers by maintaining essential functionality.
• Identify opportunities to retain value: This may mean retaining the customer base with a customer migration or selling parts of the product to recoup costs.
• Plan 10 steps ahead: Decline can take a long time, but if there is no plan it can be over in a heartbeat. An exit plan that involves retention of value can take many years, so planning early is essential to not be caught off guard.

Although a declining product may appear to be a cause for concern, it is possible to navigate this phase effectively by implementing strategic planning. By establishing a clear plan to preserve its value, you can sustain a declining product for several years and transition away from it without incurring significant costs. It’s essential to recognise that a declining product may have enjoyed decades of success, and it deserves a thoughtful and respectful approach to its retirement — particularly in complex and evolving markets such as Product Management in Australia.

This is the last article in our 5 part series. We hope you found the series insightful and it gave you some good tips to plan for the lifecycle of your product. You can find the entire series in the Brainmates insights repository here.