Selling a lot of Products/Services, reducing them will help your business profits
Deep diving into this blog will help you in improving the business profits by learning some expert-back strategies. Over the last 10 years, the products are getting increased in almost all categories of consumer goods & services. Nowadays, many companies continue their product expansion strategies. To be specific those strategies include particular line extensions. At the same time, much evidence indicates the risk of that aggressive expansion in the cause of not being well managed. It shall also weaken the brand images, increase hidden costs, and some disturbing relationships with retailers & distributors.
A company must own a portfolio of products that play a unique role. If the role of a product no longer reaches a company’s goal, it must be ceased as they have chances of draining the company’s resources and finances. A product that cannot perform shall be identified with the following:
- Decrease in market share or sales volume
- Low profitability
- Maintaining market share seems to be costly
- Poor fit with the business strength
Stopping production to cut your losses pays to be more strategic. There shall be numerous product elimination strategies that a company can implement for easing the pain of poor producing product among which line simplification; harvesting and total line divestment stand out.
Line Simplification is a defensive strategy that is used to trim a company’s product into a manageable size for cutting down the varieties and number of products offered. It is employed to keep the failing line stable. It benefits by including potential cost savings for the long run and reducing the inventories. It mainly focuses on marketing initiatives. But remember, this strategy shall create a direct impact on the market share of a company.
Harvesting is yet another strategy in which a company can earn a product’s most cash flow outs since it lasts. We can employ this strategy when we witness a gradual declination in sales volume and market share of a product. It is performed by either cutting down the cost related to business or increasing a product’s price without zero increase in operation or production costs. Once the product breaks off to offer a positive cash flow, it will be divested.
The implementation of this strategy will be a strong elimination choice for unstable products with a small market share and a declining market. This shall also reduce new investments like advertising, research budgets, reducing the number of models and maintenance facilities.
Finally, total line divestment is clearing out any product that doesn’t perform well in a growing market. This strategy can be applied only when there is no connection between the core of business & product to be divested and inadequate capital. Divestment shall increase the growth rate and ROI for a company.
Any company must undertake the analysis of their market share in which our myBooks software plays a vital role. Our financial software gives a keen report on growth prospectus, cash generation, and profitability. Not sure of performing analysis of your business? Then reach us!