How Close to Retirement Is Your Product Mix?

When sales of a particular product are down, many CPG companies begin the age-old tradition of speculating the reasons why. Has the sales staff neglected pushing the product to customers? Is the product being placed in a low-traffic area of the store? But the answer to the question that many companies try to avoid is that the product may very well just be nearing the end of its useful life in your product mix.

This can happen to almost any product for a variety of reasons. The product may have experienced success during a time when it fit with a trend, alternate products may have cannibalized the market share, or for a myriad of reasons it may have just fallen from favor with consumers. Whatever the reason, recognizing the end-point for a product and acting quickly to remove it from your portfolio is vital so that replacement brands can be introduced and unnecessary complications are removed from your business.

The decision to retire a product from your portfolio can be difficult considering all of the effort that may have gone into promoting it and building a customer base, but failure to act can result in unnecessarily complicating  inventory, opening up to confusion if alternate products are introduced, and increased supplier costs.  

But how do you know when a product is in need of retirement?

In a white paper from The Hartman Group, the product life cycle is demonstrated using a simple bell-curve:

Product Mix Lifecycle
Product Mix Lifecycle

Using this chart as a guide, it becomes relatively simple to plot out the sales trend of any given product in your portfolio and compare it against this model to determine where in its life cycle it is. By visually mining through a product’s sales history with a software solution like Salient’s Margin Minder, you can quickly and easily see the product performance by itself or charted against other portfolio products to investigate potential cannibalization or trends throughout a category.

By placing sales information in this kind of context, the process of evaluating products and reaching determinations about their contributions to profitability become much more fact based and are reached with much greater confidence.

For more information on Salient Management Company and how to identify potentially harmful products in your portfolio, download our free white paper.

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