Discounts and distribution prop up revenue for a while. We break down the signals that tell you it's time to rebuild the range, and why owners are the last to notice.
Most owners learn that their product strategy has gone obsolete from the profit statement. That is the latest signal there is. By the time revenue sags, the strategy broke long ago — the gap was simply masked for a while by discounts, promotions and accumulated distribution.
A product strategy stops working not when sales fall, but when five things that should point in the same direction start to diverge: the customer's job, the channel, price, margin and what sets you apart from competitors. Below is how to see these divergences before revenue does, and why even strong owners are the last to notice them.
Revenue is easy to hold up by inertia: widen the discount, add a line item, push distribution harder. All of this defers the diagnosis and, at the same time, eats away at the very thing the business exists for — margin.
This is most visible in consumer markets. In their 2023 review of European grocery retail, McKinsey and EuroCommerce name margin pressure, shoppers trading down to cheaper options and the growth of retailers' private labels as the year's dominant themes. Product still moves off the shelf, yet pricing power and profit are already draining away. The ability to raise prices tells the same story: in China's fast-moving consumer goods market, Bain recorded a return to falling average prices in early 2024. When the market will not let you raise prices, a company starts paying for volume out of its own margin — and that is a symptom, not a tactic.
The customer's job has changed, but the product has not. The customer hires the product for a different job, or solves the problem in a different way. The first sign is that new versions and offers convert worse than the old ones, while the old line holds up only on a loyal base.
The customer has moved to a different channel. They buy at a discounter or online, while your economics — on price, promotions and logistics — are built around the old channel. McKinsey and EuroCommerce note the outsized growth of discounters and their own labels, and Bain sees demand in China shifting into cheap online channels. The warning sign is that your fastest-growing channel is the one where your economics, at best, break even.
Price has come unmoored from value. The discount turns from a tool into a condition of the deal. A rising share of promotions in revenue is not about aggressive marketing — it is a sign that the product no longer sells at full price. If there are almost no sales without a discount, you are running the business through the discount rather than through value.
Margin has contracted into a narrow set of items. The range keeps growing, yet profit concentrates in a few SKUs while the long tail is subsidised. In its 2022 review of consumer company operations, McKinsey advises cutting items that create no value, but warns that reducing portfolio work to a mechanical trimming of the range is a mistake. The sign is that profit concentrates in a minority of items while the rest are kept "for the sake of the range."
Your differentiation has gone to zero. What set you apart has been copied by competitors or devalued by an external event. McKinsey notes that in many categories the quality of retailers' private labels has caught up with the mid-price segment, and the "cheaper at the same quality" argument has stopped working. If everyone now has your main advantage, communication will not win it back.
A simple rule: one divergence is a reason to look closer; two or more is a reason to rebuild the strategy rather than fine-tune it.
Sometimes the signal comes not from metrics but from the complete absence of sales. On one of our projects — an education company working with the public sector — a major product simply found no demand: it required deep integration into the regulatory framework, rollouts never launched, and there was no revenue. What saved it was not a stronger sales push but a rebuild of the range. We broke the heavy product down into small modules that could be sold to businesses separately, tested the hypotheses on the very first deals, and only then assembled a platform out of the proven parts. This is exactly the case where the customer's job and the channel diverged from the product, and it is cured by a pivot rather than by pressure on the funnel.
The cost of delay is even clearer in the story of r_keeper and iiko. r_keeper entered the Russian restaurant automation market back in 1992 and for many years remained the undisputed leader. It lost that lead not because the product got worse, but because it was late twice.
The first time was in the move to online fiscalisation. Federal Law No. 290-FZ, which introduced online cash registers, was passed on 3 July 2016, and reporting data to the tax authority became mandatory in stages: for food service on the general and simplified tax regimes — from 1 July 2017; for outlets on UTII and the patent regime with employees — from 1 July 2018. A restaurant cannot operate on a cash register that does not comply with the law. Those to whom r_keeper failed to deliver a compatible update in time simply left for the vendors that did.
The second time was during the delivery boom. In 2019–2021 the food delivery market grew several times over, and orders started flowing through aggregators, chiefly Delivery Club and Yandex Eda. iiko bet on deep integration with aggregators and consolidating all orders in a single window, and captured the flow of new outlets. r_keeper took the same path too late.
The two delays coincided with a moment when both the law and the demand model were changing at once. That was enough for iiko to become the default choice for new openings by 2023. r_keeper did not disappear — today it is tens of thousands of outlets across dozens of countries, and after the founders bought the product back in 2023 it has a chance to regain momentum. But leadership once surrendered is always more expensive to win back than to hold. The speed of updating at a moment of external upheaval, whether regulatory or market, is not an operational detail but part of the product strategy.
The reasons are usually managerial, not market. When an owner has several businesses, none of them gets enough immersion to reach a diagnosis in time. Changing the model or the team takes money and involvement, so it is easier to wait and hope the situation corrects itself. The planning horizon shrinks to the nearest targets, and big bets go unplaced. And there is almost never someone trusted enough to be heard when they voice an uncomfortable truth: strong employees say it, but there is not enough trust in them.
What helps is that an honest review speaks the language of different executives at once. To the CFO it shows margin after all discounts and the payback period on investment in the range. To the commercial director it shows that the endless fight over discounts is a symptom of a price unmoored from value, not a weakness of the sales team. To the marketing director it shows that a copied advantage cannot be won back through communication. This is where an outside view proves useful: inexpensive, timely and not tied to internal relationships.
The method has its limits. It works where there is management accounting with margin by product and access to customers and sales for interviews; without allocated costs, margin by item becomes a fiction. And it does not replace the next step — the portfolio decision and the price rebuild. But as early diagnostics it is more honest than revenue.
If the divergences are already recognisable in your data, it is wiser not to wait for the profit statement. A portfolio diagnostic takes two to three weeks: break down margin by item, the price funnel and the channels, add a dozen interviews with sales and customers — and produce a decision map: what to grow, what to close, what to repackage.
Sounds familiar?
Product strategy →Leave your phone number — we'll call you back within the business day.