t’charta AG | master new territories Zurich, Switzerland

7 Clear Signs Your Products and Services May Need Refinement

During a recent client discussion about their product portfolio, I was reminded of the complexity of ensuring long-term viability and relevance of a product and services portfolio. Strategic product management goes beyond immediate profits. It requires a visionary approach. This is especially true for products and services characterized by multi-year development periods and demanding production cycles. Since 2000, 52% of the companies in the Fortune 500 have either gone bankrupt, been acquired, or ceased to exist.  The demise of Nokia in the face of innovative smartphone development and the failure of Blockbuster in the face of the streaming trend are strong reminders of the dire consequences that may affect the companies which could not read the signs of change in their markets. Proactively identifying potential pitfalls is therefore paramount.

Working closely with clients has taught me how to spot anomalies and challenges arising in products and services early, long before they escalate to overwhelming proportions in their lifecycle. There are seven unmistakable dysfunctions of products which are signs indicating the need for strategic realignment of a company’s offering.

#1 Declining Sales or Markert Share

Experiencing a consistent downturn in sales or a continuous loss of market share is a red flag for any business. In the first year, it might be dismissed as a temporary dip in sales. By the second year, one might attribute it to issues within the sales organization. But by the third year, when you observe your competitors outpacing you, it might already be too late. Declines in sales don’t occur in a vacuum. They often signal deeper problems such as product irrelevance, emerging competition, or shifting consumer preferences. When previously popular products or services begin to show a consistent decline in sales or a drop in market share, it’s crucial to immediately reassess whether they still cater to customer demands and whether their market positioning remains accurate.

#2 Rising Customer Acquisition Costs Coupled with Declining Loyalty

Attracting a new customer is typically five times more expensive than retaining an existing one (FinancesOnline, 2023). And the long-term value of a retained customer often outweighs the volatile value of a newly acquired one. KPIs like Cost Per Acquisition (CPA) and Lifetime Value (LTV) can offer clear insights. An increasing CPA, especially when contrasted with a stable or declining LTV, suggests that you’re spending more to get customers who might be less profitable in the long run. Additionally, when the percentage of customers that stop using your product (churn rate) increase, or customer satisfaction scores start to dip, it’s a tangible sign of declining loyalty.

#3 Inadequate Response to Customer Feedback

Today’s digital age means feedback can be almost immediate. If your company is slow or unresponsive to such rapid feedback, it suggests that internal processes may require refinement. Customers offer direct insights into the market’s needs, and delays in reacting to them can make them feel marginalized, pushing them towards competitors who listen.

Source: Visual Capitalist, 2016.

#4 Diminishing Product Differentiation and Delayed Innovations

In industries that are characterized by swift technological advancements, a failure to innovate can diminish competitive standing. Without ongoing innovation, products that were once known for their distinctiveness can easily turn into commodities or be surpassed by competitors. If you notice consistent delays in your product development or missed opportunities to innovate, it’s a concerning indication that your innovation approach may not be in tune with prevailing market needs.

#5 Disjointed Customer Experience

Customers are becoming increasingly merciless. 32% of consumers say they will walk away from a brand they love after just one bad experience (PWC, 2018). When customers interact with your products and services across different channels or touchpoints-whether it’s through an online platform, a physical store, or customer support-the experience should be seamless and consistent. Inconsistencies in the quality, presentation or representation of your products and services can lead to confusion and diminish trust, which increases the risk that you are pushing your customers towards your competitors.

#6 Pricing Misalignment

If your offerings are undervalued or seem overpriced without evidence, it’s time to re-evaluate. It’s not just about setting the factual correct price but ensuring customers understand and appreciate your product’s value. A study in the Harvard Business Review highlights that 60% of consumers consider price alignment with perceived value as a major factor affecting their purchasing decisions.

#7 Over-reliance on Discounts and Promotions

While occasional discounts can boost sales, a constant reliance on them might dilute your brand’s perceived value. Brands that heavily rely on promotions see an average of 15% decline in customer loyalty (Nielsen, 2021). If promotions frequently drive your sales rather than product value or brand loyalty, it’s a clear sign your product or service strategy needs reconsideration.

Failing to recognize these dysfunctions in product or service portfolios can have serious implications on your business. Strategic product management means promptly identifying these issues. This enables timely re-assessment and course recalibration, ensuring products meet market demands. With long development cycles, delays can render products outdated for years. Regaining lost customers afterward is tough, especially with ever-evolving competition.

Reading these signs of dysfunction is essential for sustained business success.

Sources:

’70 Customer Retention Statistics for 2023: Loyalty Programs & Strategies’, Finances Online, 2023, www.financesonline.com, last access 9th of October 2023

‘When Digital Disruption Strikes: How Can Incumbents Respond?’, Capgemini Consulting, 2017, www.capgemini.com, last access 9th of October 2023

‘Why Your Customers Are Leaving – and How To Win Them Back’, 2016, www.visualcapitalist.com, last access 9th of October 2023