It can be hard to know when the right time to discontinue a service or product is, especially if you offer many. Some owners will continue selling a product because it was the original or maybe they have high hopes that a product will make a comeback. While that may be true some of the time, you have to be objective in identifying financial drains if you want profit to be part of your brand’s success. There are many factors to weigh when your faced with altering the product line or services offered.
Rate of Return
You must consider your preferred rate of return on a product should be; set goals based on you spend to create the products, the market you are selling in, and what’s trending in the industry.
If you are analyzing your products and if they are really profiting your business; you must evaluate the total cost a product generates. You should review the fixed manufacturing costs, selling costs, storage, customer service, transportation, and shipping costs. This could take a little time to compile but it could be well worth it to investigate how your products are tracking.
Depending on the product, you will want to think about how you can stop producing without creating a lot of layoffs. To keep and continue to develop talented employees, transition them to another sector or to work on another project as you phase out the retired product.
Costs for Opportunities
There are costs associated in updating or modifying a model or product to keep it in the game. You have to decide how much you will be willing to invest in one product to keep it in line. Also remember to ask yourself if you could be using this investment in another more fruitful way.
Associated Product Effect
When the sale of one product slows the sales of another, this is called product cannibalism. This can be a reason to keep a product, but it could also be such a slight affect with an overall profit in the long run.
When you a ready to drop a product, but you realize that if you do it could drop sales of another product, this is a cross-sale. This complicates things, and depending on the profit, you may end up holding on until you can find an alternate solution.