Do you have a strategy for your maturing products?
Launching a product is cool – your product sees the light after a long and windy development cycle. Generating adoption is even more cool as people are actually starting using your product. Rapid product growth is the coolest – everyone starts loving your product and they cannot seem to get enough of it – you are rocketman!
Then, after a while growth diminishes. You first ignore the signs as you already are working on other cool new products that also need to get shipped. Then your buddy, the Head of Sales hits the panic button as sales targets start slipping. Where are your customers going, what’s going on?
Running your top performing products with a blindfold on
Your department head or CEO hears the news, and before you know it your weekend is gone and you are number crunching. You’re going through the sales numbers, comparing revenue per customer year by year. What are the movers and shakers, which customers did you lose. You start calling every sales hero looking for answers. But…… they also don’t know what’s happening. The conclusion after your initial soul searching exercise is that you have no idea what’s happening. You are basically running your top performing product category in the dark, and have no plan, no strategy and no clue.
Every phase of the lifecycle needs a product strategy
When launching a product, you typically have a plan. For the international expansion of your product you also have a plan. A product that reaches mature levels logically needs a plan as well. This plan should not just be an excel sheet with sales targets per customer and country, no it deserves activities, monitoring and needs tweaking.The type of activities obviously differ from those when you are entering a market. Customers are already familiar with your product, know your brand and the product has proven its worth in the market. What should your plan include?
Mature markets require thorough monitoring
If there is one thing that I’ve learned over the years is that you cannot spend enough time monitoring the performance of your product. As a product manager you are the CEO of your product and need to know it’s P&L. Data is king, and you should keep analyzing product performance with the objective to truly understand the health of your product in the market. Are the features of your product not in need anymore (fax machine → mobile phones, project management → agile). Is the reputation of your product being negatively impacted (baby milk in China). Are customers moving to competitors (H&M customers moving to even cheaper clothing brands like Primark). Is the competition stealing customers away from you, or are they launching new cool features that your customers also want (smart home lighting -> boring lighting).
The two main things to keep an eye out for are:
- Are you losing customers to competitors for whatever reason (aggressive pricing, better features, better service)
- Is your product still meeting the needs of the market (creative destruction)
Losing customers to competition
When losing customers to competitors, there are a number of strategies you can pursue to regain or retain customers.
In mature markets the price of your product is typically under pressure. There are many competitors, switching costs are often low, and price is a good reason to switch. Sales people love discounting, so dropping prices makes customers and your sales buddies happy.
Dropping a price is easy, but increasing it later is difficult. You should only drop the price if you really believe, and data has proven this, that your price is above market par. An alternative to dropping pricing could be a temporary discounting campaign or offering loyalty discounts to customers who stay with you.
Aggressive acquisition campaign
Everything grows when you pay attention to it. So if you focus all your attention to the customers of your competitors there is a chance you may win them over. This requires a dedicated campaign that you set-up with your sales team and specific incentives that will help your customers switch. It will trouble the relationship you have with your competitors, so it may not be worth it if you need to collaborate with your peers in other areas. From my experience price alone is never a good reason to switch. When customers are happy with their current provider they will consider the switching costs that come with moving over to you. The price needs to be so darn good that they will want to consider this. Typically customers move when your competitor has messed up. They delivered a faulty product, their service levels are dropping, etc. One that happens, be ready to give these customers a warm welcome.
How to maximize returns in a crowded and price sensitive market, differentiate! If your customers are crying for a reduction in price, just offer them a dressed down version of the product that comes at a lower price. They want to pay less, so give them a little bit less, in many cases this will do and you can retain these customer (but it will eat into your margin). Alternatively, you can retain these customers by offering them a premium version of the product at the price levels they are paying today. So they will get a bit more, but pay the same – it will make them feel special.
Offering a ‘budget’ version of your product at a low price can also help you win new customers who might be interested in your attractive offer. Once you have them on board, cross-selling other products with better margins helps you optimize your revenue.
Differentiation does require you to think through your offering very closely. There should be a genuine difference between the versions you offer. Take Volkwagens’ Trendline, Comfortline, Highline versions for example. Each model has distinct features that help you consider the right model. Apple does the same with models like the 12, 12 mini and 12pro – better camera, better screen.
When the features are not distinctive enough, customers will pick the cheapest option, and that will meet their needs. What you want is that everyone aspires to go for the premium option.
A brand new edition with small innovations
Car manufacturers, phone makers, and TV manufacturers do it all the time, they launch an all new version of the product every year. The new editions typically include small innovations that were not there before. For example a better camera, more pixels, additional content, additional API’s, etc. When you keep adding small innovations to your proposition, it will keep your offering fresh and interesting.
Keep monitoring the market to see what competitors are doing. If they are launching features that you are not yet offering, it may be worth to operate a ‘me-too’ approach, and simply add these features as well. A better position would obviously be where you are setting the tone, and your competitors are following you 🙂
Your product is not meeting the needs of the market anymore
The world has moved on. The CD was once a great innovation, but streaming services have taken over. There comes a time that your product has outlived its use and it is time to say goodbye. Your responsibility as a product manager covers the entire lifecycle of the product from cradle to grave, so it is up to you to determine the exit plan.
Retiring a product also needs a strategy – see my post on product lifecycle management. Are you going to maximize returns for a period of time and raise the price, or are you going to offer lowball pricing in order to win over business from competitors, and when exactly do you retire your product, when do you communicate this to your customers, and what is their alternative? Just like launching a product, retiring a product needs a strategy as well.