Why do Companies Discontinue Products? - [Factors Revealed]

Madhu Kumar C
Jul 28, 2023
6 min read

Updated: Aug 11

Why do Companies Discontinue Products?:

Companies often discontinue products for various reasons. While it may seem frustrating to a consumer when a beloved product suddenly disappears from the shelves, there are often valid reasons behind this decision.

Let's dive into some of the most common factors that lead companies to discontinue products. Also, don't forget to see the FAQs at the end.

Do you know? - “30% of goods are returned because the products did not match what the person saw on the website” – RETAIL DIVE

Why do Products Get Discontinued?:

1. Declining Sales:

Companies need to generate revenue, and if a product isn't selling well, it can become financially unsustainable to continue producing it.

Sales figures are carefully monitored, and if a product consistently underperforms, the company may choose to discontinue it, allocating resources to more profitable ventures.

2. Changing Market Demands:

The marketplace is constantly evolving, and consumer preferences can shift dramatically over time.

If a product no longer aligns with current trends or fails to meet changing customer needs, companies may choose to discontinue it.

To stay competitive, businesses must adapt to these changes and allocate resources toward developing new products that better meet the demands of the market.

Remember - “If you can create buzz around your product that makes it different from the competitors, you are more likely to sell more products and services” – Level343

3. Technological Advancements:

Technology plays a significant role in product development. As new technologies emerge, companies may need to phase out older products that can no longer keep up with the latest innovations.

By discontinuing outdated products, companies can invest in research and development to create more advanced offerings that stay ahead of the competition.

“Your business and industry can be shaped by many factors– new technology, changing best practices, current events, market trends, etc. Your site can be a strong reflection of your position in the marketplace” – Orbit Media Studios

4. Cost Considerations:

Sometimes, the cost of producing a product becomes too high for a company to sustain.

Rising manufacturing costs, raw material price fluctuations, or changes in regulatory requirements can all impact a product's profitability.

In such cases, companies may choose to discontinue the product rather than pass on the increased costs to consumers or risk operating at a loss.

5. Strategic Decisions:

Companies regularly evaluate their product portfolios and make strategic decisions about which products to prioritize.

This can involve discontinuing certain products to focus resources on core offerings or new product development initiatives.

By streamlining their product lines, companies can allocate more resources toward innovation and marketing efforts for their most promising products.

“For a product ecosystem to be beneficial to buyers, you need to ensure your products or services are effectively solve the challenges and pain points of your target audience. To do this, listen to your customers” – HubSpot

6. Rebranding or Repositioning:

In some cases, companies discontinue products as part of a larger rebranding or repositioning strategy.

This can involve phasing out older products that no longer align with the company's new brand image or target market.

By discontinuing these products, companies can create space for new offerings that better align with their updated brand identity and marketing strategies.

There will also be instances when products get discontinued due to legal aspects.

Product and Technology Leadership Positioning

In conclusion, it's important to note that companies don't decide to discontinue a product lightly.

They carefully consider various factors, such as sales performance, market dynamics, cost implications, and strategic objectives, before making such decisions.

While it may be disappointing for consumers when their favorite products are discontinued, it's often a necessary step for companies to stay competitive and meet evolving customer demands.

Here's related information that you may find helpful - Why do Brands Matter to Manufacturers?

FAQs:

Why are Products Discontinued?:

Products are discontinued for various reasons, including declining sales, changes in consumer preferences, high production costs, legal issues, poor market response, or the introduction of newer and more advanced alternatives.

What Does it Mean When a Product is Discontinued?:

When a product is discontinued, it means that the manufacturer has stopped producing or selling it, often due to various reasons such as low demand, high production costs, legal concerns, poor market response, changed consumer preferences, or the introduction of newer alternatives.

“Standing out amid the sea of products and services necessitates identifying and addressing a genuine market need. If an innovation meets an unaddressed market need, then it can put itself in a position to be successful” – Entrepreneur

What Happens to Discontinued Products?:

Discontinued products are typically phased out of production and sales, and existing inventory may be sold at clearance prices or recycled.

Why are Popular Products Discontinued?:

Popular products are discontinued for a variety of reasons, including declining demand, production or supply chain issues, or the need to make room for newer, more innovative offerings.

Businesses Need To Look For While Creating Products:

aspects businesses need to look out for while creating products — Image Content Source - Semrush

Where can I Buy Discontinued Products?:

You can buy discontinued products from online marketplaces, auction websites, specialty retailers, clearance sales, or through direct sales from the brand's outlet stores, if available.

Where to Find Discontinued Products and Retro Items?:

Places to find discontinued products and retro items:

eBay and online auction sites.
Thrift stores and secondhand shops.
Flea markets.
Facebook Marketplace.
Local buy-and-sell groups.
Specialty retailers that focus on nostalgia products.
Garage sales.
Collector conventions and trade shows.
OLX platform.

Product Discontinuation Best Practices:

Here are the product discontinuation best practices you should be aware of:

Provide advance notice to customers (6-12 months).
Clearly communicate the timeline and rationale.
Offer suitable replacement products or alternatives.
Honor existing warranties and support commitments.
Create a detailed migration path for customers.
Provide special incentives to transition to new products.
Train customer service to handle discontinuation queries.
Develop an end-of-life support policy.
Consider selling the remaining inventory at discounted rates.
Maintain parts or service availability for a reasonable period.
Document lessons learned for future product transitions.

How do Companies decide which Products to Discontinue?:

The following are some important aspects based on which companies decide which products to discontinue:

Evaluate financial performance (profitability, revenue generation).
Assess alignment with strategic direction and product portfolio.
Analyze customer usage, loyalty, and satisfaction metrics.
Consider operational costs and resource requirements.
Examine market trends and competitive landscape.
Review technical sustainability and maintenance requirements.
Evaluate the impact on brand image and customer relationships.
Analyze production and inventory management implications.
Consider legal and contractual obligations.
Assess the opportunity costs of maintaining versus discontinuing.

Product Discontinuation Decision Criteria:

The general product discontinuation decision criteria are as follows:

Low sales volume or declining demand.
Poor profit margins or negative ROI.
High maintenance or production costs.
Product becoming technologically obsolete.
Competitive pressure from superior alternatives.
Strategic portfolio shifts or brand repositioning.
Supply chain or manufacturing challenges.
Regulatory changes or compliance issues.
Poor market fit or customer satisfaction.
Resource allocation to higher-potential products.
End of product lifecycle or planned obsolescence.

Product Line Discontinuation Decision Factors:

The general product line discontinuation decision factors are as follows:

Consistently declining sales and revenue trends.
Low or negative profit margins.
High maintenance or support costs relative to returns.
Strategic shift in company direction or focus.
Manufacturing inefficiencies or supply chain issues.
Regulatory compliance challenges or legal risks.
Market saturation or declining demand.
Better resource allocation opportunities.
Brand inconsistency or reputation concerns.
Technological obsolescence.
Competitive pressure from superior alternatives.

What does Discontinued by Manufacturer mean?:

"Discontinued by manufacturer" means the company has permanently stopped producing that specific item.

While existing inventory may still be available for purchase, no new units will be manufactured, typically due to factors like low sales, replaced models, strategic changes, or production challenges.

“In markets where products are complex, differentiation is minimal, or categories are still emerging, the need for tailored, insight-driven communication becomes even more critical. Education offers potential buyers the context and confidence they need to make a choice and champion it internally” – MarketingProfs

Product Discontinuation Process:

Here is the product discontinuation process in general:

Conduct product performance analysis (sales, profits, strategic fit).
Make a formal discontinuation decision with stakeholder input.
Develop a detailed transition timeline and communication plan.
Notify internal teams (sales, support, manufacturing).
Inform customers, partners, and distributors with advance notice.
Plan inventory management (final production runs, liquidation).
Develop migration paths to alternative products.
Create an end-of-life support strategy.
Execute final sales or promotions to clear inventory.
Document process and learnings for future discontinuations.
Update product catalogs and marketing materials.

Here's related information that you may also find helpful – Why do Companies Change their Logo?

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