When looking at their product portfolio, many managers start to feel a bit average. Is above average volume more important than below average profit? It should be as easy as betting on a horse race where you have trained every starter! However, there are a lot of underlying issues that can muddy the track.
Even in a service based industry it costs a lot to develop and market a product and keep staff on hand who know how to deliver it. If it has to be manufactured or imported, the cost is even higher. So when is a product performing below average? At what point should you pull the plug? And which products have the best potential for success if they were treated better?
When reviewing products, each should be treated on its merits with as little emotion clouding the issue as possible. Otherwise you will keep building Hummers until you go bankrupt. But poor sales performance may not be entirely the fault of the product. There are many reasons why good products underperform. Brand, time, price and manner of distribution are amongst a number of issues that can dampen demand. Also, many businesses have products that are just for show. Paint manufacturers always head their colour-wall with bold hues that attract attention but rarely sell. These losses should be seen as an investment in marketing.
As a rule of thumb, your star products are those that suit your business strengths while rating highly in market attractiveness. That is, high demand and high barrier to entry as defined by factors specific to your industry. Once you have separated the nags from the thoroughbreds, you are much closer to picking the winner.
Andrew Wylie is the director of Pandemonium, strategic thinkers in marketing, sales and creative.
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