Sunsetting a Product

By Kristin Runyan February 17, 2015

Pragmatic Marketer Volume 12 Issue 1

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’s 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 efficiencies 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?” It’s a challenging task that requires using the tools you’ve 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.

Collect Data

If ever there’s a project that should NOT be executed based on gut feel, this is it. You can’t sunset a product without upsetting some aspects of your business, so it’s not something to take lightly. 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 sunsetting projects and this stage always provides interesting data to inform our direction. For example, I worked for a business-to-business 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 decommissioned this product because when we analyzed the customer base, there wasn’t any overlap with our target customers.

Consider Alternatives

Once you understand the affected customers, 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. However, it might be the right move. If you want to keep the customers, but need them to migrate to a new product or platform, 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.

Understand the 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

If you are considering sunsetting a product or platform, you need to think about how to communicate this both 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 in your sunsetting communication strategy.

The easiest way to create a plan is simply to grab a calendar, pinpoint the desired date of the decommissioning and work backwards. You may need to overcommunicate to ensure that customers receive and digest your message. Always use words that are clear and action-oriented. By understanding the available communication vehicles, you can carefully consider how to strategize. 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 have the ability to differentiate customers of the product targeted for sunsetting. That way you can avoid informing the entire customer base about something that doesn’t affect them.

Involve Marketing

Product management and marketing are often tightly linked, and sunsetting is one area where the partnership is essential. Marketing must participate in—or own—the messaging and communication plan. This includes editing the messaging, engaging different communication channels and even revising existing marketing campaigns to minimize any negativity related to the sunsetting project. Everything customers see or read about the product decision contributes to their overall perception of the brand, so product management and marketing need to work together closely 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 of the customer touchpoints within 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 artifacts 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 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 in order 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 of the product or platform as their contracts expire. Although this could take up to a year to complete, in certain circumstances it might make the most sense.

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 discounted professional services 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.

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 to deeply discount it to drive the desired behavior. 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 a number of 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.

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 drawers: You get rid of older items that no longer make you look good to make room for new, innovative things that will take you to the next level.

To create energy and priority around the sunsetting effort, focus on data to ensure the decision is made without bias. Create a thoughtful and comprehensive communication plan that will help customers appreciate your actions, rather than resent them. Finally, be mindful and forward-thinking about pricing, refunds and incentives to ensure that the bottom line is appropriately cared for—both today and in the future.

SIDEBAR

Talk to the Market Before Sunsetting

By Craig Stull

Before sunsetting a product, it’s important to talk to the market to make sure you understand the impact sunsetting will have on that product’s customers. How do they use the product? What alternatives exist, and what do they think of those alternatives? Then you can use that customer data to determine how and when to sunset the product.

I learned this firsthand when I was vice president of marketing for a company in the mid-1980s. My company, which owned a production-control product, acquired a smaller company with a security product that we wanted. In addition to its security product, the company owned a production-control product that competed with ours. Their product had 200 users and sold for $20,000; our product had 2,000 users and sold for $50,000. Based on this information alone, my company’s leadership decided to kill the newly acquired product and allow those users to upgrade to our 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 we announced we would kill the newly acquired product, the 200 users called an emergency national users group meeting in Kansas City. These customers believed in their product and were willing to drop everything to fly to a meeting. This was a crisis for them: They were being told that a product they relied on would no longer be available. Our company agreed to attend, and I was the emissary.

The audience politely listened to me as I explained our position. Then they pointed out why what my company was doing was inappropriate. These customers had researched our product before choosing the other one. They didn’t want our 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 our 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, I called my company president. I knew I couldn’t go back into that room unless we did something to appease the situation. Otherwise, we’d lose control of the story to the media. He agreed to continue to support the product indefinitely. When I returned to the room and said “Good news, we’re going to support the program indefinitely,” they cheered like it was the Super Bowl. No one questioned what “indefinitely” meant.

The customers left happy and talked to the media. And the media saw us as an example of a company that did right by the customers. It ended up as a public relations win. But we could have prevented the entire thing if we’d talked to the users first. We could have sampled some of the customers and asked what they thought would be an appropriate way to handle the situation. We could have mitigated the impact of sunsetting that product by remembering that outside-in always trumps inside-out.

Kristin Runyan

Kristin Runyan

Kristin Runyan is a product management professional with more than 20 years of experience in telecom, enterprise software and benefits administration. She is co-author of Introduction to Agile Methods, a textbook released in 2014, and she is working on another book. Kristin is Pragmatic Institute Certified. She is also a certified Scrum Master (CSM), Scrum Product Owner (CSPO), and Project Management Professional (PMP). In addition, she is a 2011 winner of the Women of Innovation award from the Technology Association of Iowa. Kristin earned her undergraduate degree at Texas Christian University and her MBA at Saint Louis University. Follow Kristin on Twitter at @KristinRunyan and read her blog at www.runyanconsulting.com.

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