9 minute read
Sunsetting a product is a strategic but complex process, requiring careful planning, data analysis, and communication to minimize disruption to the business and customers. Learn how to sunset a product the right way.
I think product management is the most fun job in the world. You get to be strategic and tactical, lead and follow, listen and be heard. In more than 20 years of product management fun, one of my favorite—and most used—phrases remains: “We are responsible for everything but own nothing.” It is your responsibility to influence people across the organization to buy into—and support—your vision.
It’s invigorating to build something new that has the potential to alter a customer’s experience, make his or her life better, improve efficiency or entertain. But what if the task at hand is less sexy, less exciting, and less noble? Like sunsetting a product. How can you rally the troops around the battle cry “let’s shut this baby down?”
Learn how to sunset a product by starting at the beginning or skip to the part that most interests you:
- How to sunset a product
- Collect product data
- Consider alternatives to sunsetting the product
- Understand the product’s margin
- Create a communication plan
- Involve marketing in the sunsetting process
- Inform all customer touchpoints
- Consider pricing and other financials
- Consider incentives carefully
- Final thoughts of sunsetting a product
How to Sunset a Product
Sunsetting a product is a challenging task that requires using the tools you have accumulated for product launches in a slightly different way.
If you’re looking for inspiration, review the numbers. New products often produce tens of thousands of dollars in revenue in the beginning. However, sunsetting a product can save the company millions and have a substantial impact on the bottom line. So exactly how do you sunset a product effectively, efficiently, and without creating chaos for your team or customers?
Collect Product Data
If ever there’s a project that should NOT be executed based on gut feeling, this is it. You can’t sunset a product without upsetting some aspects of your business, so it’s not something to take lightly. Exactly how do you know that a product is at the end of its life? The first and most important thing to do is to collect data to ensure that you make a prudent decision.
Gather solid data from the company’s financial and CRM systems to answer the following questions:
- How many customers are impacted?
- How important are they?
- What other products have they purchased?
- What prices are they paying?
- What is their lifetime value?
I’ve worked on several product sunsetting projects, and this stage always provides interesting data that guides our direction. For example, I worked for a B2B telecommunications company that inherited a residential customer base in an acquisition. They didn’t want to be in the residential business and discussed sunsetting the residential product. However, the data told us that this customer base paid far above market rates for their services. Our margin analysis indicated that this was an extremely profitable business, and we should avoid taking any action that might cause churn. Once we presented this information to senior management, they quietly closed the sunsetting project.
In another instance, the same company acquired another product offering that wasn’t strategically aligned with the business goals. We sunset this product because when we analyzed the customer base, there wasn’t any overlap with our target customers.
Consider Alternatives to Product Sunsetting
Once you understand the effect of sunsetting a product you can determine the available alternatives.
- Are you providing a migration path for existing customers? Do you have another product for them to migrate to?
- Is this customer base valuable? Could you package and sell the product offering and the customers to a third party?
- What is the competitive landscape? Will your competition use this effort against you with existing customers and prospects? Is there a competitor you want to encourage the customers to engage with?
It’s important to think through the different options. It can be risky to turn off a service without offering existing customers any option but to find another provider, but in some instances, it may be the right move.
If you want to keep the customers but need them to migrate to a new product or platform, you could provide adequate short-term incentives to make it worth their effort. There is no single right answer because each product, company, and customer base will be slightly different. Err on the side of caution and explore the impact of various paths before deciding to officially sunset a product.
Understand the Product’s Margin
Most product managers have a handle on the revenue for their product, but the strong ones also have a deep appreciation of the margin. Taking both revenue and cost into consideration is critical in decision making. Of course, you must understand the revenue that will be eliminated by sunsetting a product and that typically comes as part of the customer analysis. But it can be trickier to get a clear understanding of the costs.
Senior management often views non-strategic products as a messy footnote to the annual report; they just want them gone. But good product managers will provide disciplined, data-driven recommendations. After all, many legacy products cost little or nothing to maintain.
Consider a scenario where you have software in one code base and subsequently release the next generation of the product in a more up-to-date, flexible software language. Customers who continue to use the old software may be irritating because they’re just one more thing to think about. But if no new development occurs on the legacy product, no (or very few) resources are dedicated to maintenance and service calls are limited, then sunsetting the product may not be the right approach. Whatever decision you make should be based on data, not guesswork or assumptions.
Create a Communication Plan
When you sunset a product or platform you must carefully think about how it is communicated internally and externally. You create detailed plans to get the word out about exciting new products or features and you need to be equally deliberate when you create a communication strategy for sunsetting a product.
The easiest way to create a plan is simply to grab a calendar, pinpoint the desired date you want the product to be fully decommissioned, and work backwards. You should anticipate concerns and provide answers while using words that are clear and action oriented. You may also need to over communicate to ensure that customers receive and digest your message.
Your communication strategy relies on understanding the various communication methods available to you and most relevant to the affected customers. For example, if you rely on bill inserts as your primary mode of communication, factor the billing cycle into your calendar. It’s also important that your systems can differentiate customers affected by the sunsetting process. This allows you to avoid informing the entire customer base about something that doesn’t affect them.
Involve Marketing in the Sunsetting Process
Product management and marketing are often tightly linked, but this partnership is even more essential when it comes to sunsetting products. Marketing must participate in—or own—the messaging and communication plan. This includes editing the messaging and engaging different communication channels. It may also include revising existing marketing campaigns to minimize any negativity related to the sunsetting project.
Everything customers see or read about the decision to sunset a product contributes to their overall perception of the brand. You can lose trust and goodwill if you do not understand and account for the impact of communicating throughout the sunsetting process. This highlights why product management and marketing must work together to make the experience the best it can be.
Inform All Customer Touchpoints
When a decision is made to sunset a product, everyone who interacts with customers should be fully informed. At a minimum, this means sales, account management and customer service. If account managers are assigned to the affected customers, they should deliver the message personally—even face-to-face—if possible. Being considerate of the customers’ needs and timelines will go a long way towards making this a minor inconvenience versus a major upheaval.
You must leverage all customer touchpoints in your organization to help soften the blow and share the correct information. Just like affected customers, internal groups should be informed multiple times in multiple ways. Depending on the size and scope of the decommissioning, you might organize town hall meetings, company announcements, customer services scripts, FAQs and other tools to ensure that everyone is on the same page. You don’t want an already inconvenienced customer to talk to someone who is ill-informed.
Consider Pricing and Other Financials
At a macro level, the financial impact of sunsetting a product may be easy to understand. But other financial considerations, such as refunds, incentives, and pricing, should also be discussed and analyzed to drive the desired outcomes of a sunsetting project. If you’re truly turning off a service or going dark, consider whether existing customers will require refunds. If customers prepay, you will need to review contractual obligations, notice periods and financial true ups. The potential impact of refunds may even dictate the sunsetting strategy to minimize payouts.
For example, if you charge customers annually for the following year, you might research the month with the highest number of renewals and base the decommissioning date on that information to minimize refunds. If the sunsetting is a complex effort, it might require a rolling approach where customers are moved off the product or platform as their contracts expire. Although this could take up to a year to complete, in some circumstances it might make sense.
Consider Incentives Carefully
If you want to encourage customers to move from one product to another, offering incentives could be the right approach. These could be anything from discounts to waived monthly service fees or a credit toward future services. A good product manager should have a deep understanding of the customer base and what drives them to action. For example, in some instances, customers may be keenly aware of the enhanced feature set and want to move to the new platform. However, they simply don’t have the time or resources to execute the actual migration. In this case, an incentive to help with the migration could be what’s needed to get them to move.
Product pricing is an important consideration if you’re encouraging customers to move off a legacy platform onto something newer. It may seem advantageous to offer the new product for free or at a deep discount. But remember, you have to live with whatever pricing schema you present, so it’s important that you make careful, prudent decisions. At one company, we learned this lesson the hard way. Because the company wanted to sunset product A, they offered customers product B free of charge. It was a low-cost service, and other services more than made up the margin.
It seemed like a good decision, and many clients took advantage of the free offer. Fast-forward several years, and the company prepared to sunset product B and move customers to product C, a feature-rich product with many value-added components. Because of the previous migration, customers expected product C to be free, too. The company struggled to enforce the value-driven pricing model associated with product C. Without careful, deliberate pricing, a decision to expedite one migration can cause larger problems the next time around.
Before you Sunset a Product
Once you’ve decided that it’s time to sunset a product, you still need to talk with the market. The founder of Pragmatic Institute, Craig Stull, relayed a personal anecdote showing why this is such a crucial step.
His company acquired a smaller company which had a security product they wanted, but it also had a product that competed with one of their main offerings. This competing product had 200 users and sold for $20,000 while their own product had 2,000 users and sold for $50,000. Based on this information alone, his company’s leadership decided to kill the newly acquired product and allow those users to upgrade to their product for $15,000. There was just one problem: The two products had about as much in common as a Hummer and a Prius. They appealed to two entirely different markets.
When they announced they would kill the newly acquired product, the 200 users called an emergency national users group meeting in Kansas City. His company agreed to attend, and he was the emissary. The audience politely listened to him as he explained their position. Then they pointed out why what his company was doing was inappropriate. These customers had researched their product before choosing the other one. They didn’t want their product in the first place and they certainly didn’t want it for an additional $15,000.
One customer—a representative from Johnson & Johnson—starkly compared their poor handling of the situation to their handling of the Tylenol crisis, which garnered positive media coverage and was viewed as a success. During a break, he called the company president and discussed a way to appease the 200 users and maintain control of the story. The solution? He returned to the room and said “Good news, we’re going to support the product indefinitely,” and the room erupted in applause.
This experience taught him the importance of understanding the customer’s perspective and the potential consequences of sunsetting a product without proper market research and customer input.
Final Thoughts on Sunsetting Products
If you’re charged with sunsetting a product, reflect on the positives before you start groaning. By sunsetting a product, you’re freeing up resources and capital to work on the important, value-driven initiatives of the future. It’s like cleaning out your closet. You get rid of items that no longer work for you and make room for something new and exciting.
Similarly, sunsetting a product can be a positive and strategic move, but it should be handled carefully. A thoughtful and comprehensive communication plan, along with mindful pricing, refunds, and incentives, will help customers appreciate the decision rather than resent it. In the end, sunsetting a product can pave the way for new and improved offerings that will drive the company’s success.
Resources for sunsetting products:
Product EOL and the Product Life Cycle
23 Metrics Mapped to the Product Life Cycle
