Product's Late Phase or Maturation Period
In the rapidly evolving world of technology, the decline of a product can be a challenging phase for companies. This article explores the strategies companies employ when managing the decline stage, using the example of the Walkman and the rise of smartphones.
The launch of smartphones, with embedded Walkman functionality, marked the beginning of the rapid decline of Walkman sales. The degree of substitutability of new products plays a significant role in the speed of decline, with highly substitutable products causing a faster decline. In this case, the smartphone's portability, similar specifications, and multifunctional nature made it a highly substitutable product for the Walkman.
During the decline stage, companies face profit pressure due to slumping revenue and falling prices. To cope with this, they often focus on cutting costs, prioritizing profitability, and retaining loyal customers. This can involve reducing expenditures to maintain profitability, understanding the needs of loyal customers, and planning customer migrations to newer or replacement products.
Adapting products to the needs of current consumers or finding new uses can also help companies navigate the decline stage. However, in the case of the Walkman, no new features have succeeded in luring consumers back to the product. Consumer preferences have changed, and newer and more innovative substitutes have emerged.
Companies may choose to withdraw products if it is unlikely to reverse the decline. In such cases, they may liquidate remaining inventory or sell production rights to another company. Alternatively, they may choose to develop the closest substitute product before the primary market falls, such as a desktop computer manufacturer launching a laptop.
The market during the decline stage may consist of only a few players due to competition during the mature phase. Companies can also consider repositioning the product for a niche market segment where demand still exists. For instance, high-end audio companies still produce Walkman-like devices for audiophiles who value the superior sound quality they offer.
Finally, data analytics, including AI, can help companies identify opportunities for extending the product’s life or decide on discontinuation. They can run end-of-life promotions such as discounts or bundles to clear remaining inventory efficiently.
In conclusion, managing the decline stage requires a strategic approach that focuses on cutting costs, prioritizing profitability, retaining loyal customers, and planning for transitions to newer products. By understanding the factors influencing the decline and employing appropriate strategies, companies can maximize residual value and manage the transition smoothly while minimizing obsolete stock and financial losses.
Businesses in the technology sector, such as the Walkman's manufacturers, face financial pressures during the decline stage due to slumping revenue and falling prices. To cope with these challenges, they often focus on cutting costs, prioritizing profitability, and retaining loyal customers through strategies like reducing expenses, understanding customer needs, and planning customer migrations to newer products. On the other hand, advancements in technology, like the rise of smartphones, can make products highly substitutable, leading to a faster decline.
