October 16, 2019 11:16 am
Businesses looking to improve their profitability may need to consider cutting under-performing products and services that are unnecessarily draining resources. It might be time to discontinue if a product fits the following scenarios:
- Low profitability.
- Stagnant or declining sales volume or market share.
- Maintaining your market share is too costly.
- Risk of technological elimination.
- Poor fit with business’s strengths or declared mission.
When deciding whether to discontinue a product, there are a few ways you can examine your services and make the decision that is best for your business.
This rule states that businesses should focus their attention on the 20% of the products that generate 80% of revenue. Using this principle, companies should compile a shortlist of the products and services that bring in the most profit and scrutinise the products that fall short of this mark.
Try going a week to a month (no longer) removing all promotion and marketing for a product. This can help the business to visualise what it would look like without that service and see if there are any clients who miss it.
Cutting the costs associated with the business or increasing the price of the product without increasing production or operation costs allows the business to continue generating revenue on a failing service. Once the product ceases to provide a positive cash-flow, it can then be discontinued.
Categorised in: business