Product Death Spiral

Phenomenon first discussed by Rust, Zeithaml, and Lemon in their book Driving Customer Equity published in 2000. 

Here, a business starts out as profitable and over time encounters pressure on margins.  In response, it decides to cut certain product lines that it deems “uneconomic”.  Customers find that there are fewer and fewer products sold by the business in question that meet their needs.  This – in turn – forces customers to take a serious look at the competition.  Many of these customers end up defecting to the competition.  As retention rates fall, the business finds its profit situation worsening.  In response, management decides to drop the next “uneconomic” product from its product line.  This in turn causes more customers to defect.  The spiral continues ad infinitum until eventually the business is bankrupt. 

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