As a business owner, you don’t want to ever find yourself losing money for any reason. You should always be looking for ways to maximize your profits and build your success. If you are in the middle of making the decision as to whether or not to continue a product line, there are several things that need to be considered first. Without experience in making these decisions, they can seem overwhelming; leaving you without any idea as to where to even start. Mark Dicus & Company is here to share some tips to help you decide when it is time to discontinue a product.
Total Cost of Product
A big indicator that it is time to discontinue a product is the overall cost to your company. This would include production cost, shipping cost, storage cost, selling costs and customer service costs that all play a role. This is one of the reasons that accounting and bookkeeping is so important for any business. If you have kept sufficient records, this information is easy to find.
Importance of Opportunity Cost
This one is maybe a little trickier to decide. You see, opportunity costs includes the amount of time you spend on this product that could be spent elsewhere on other products. It also would include the floor space that this product takes up and could potentially be used for a more lucrative product in your store.
Sometimes, the product in question directly affects the sale of other products. There are times that your lower performing products may drive the sale of other products like accessories or plan upgrades. There may even be a product that you have built your business and reputation around that will bring in customers that don’t actually buy that product but are still bringing in business. This is another circumstance that requires good record keeping so that you can chart the sales and marketing performance so you know the role this product plays in your business.
Avoid Retail Cannibalization
Much like cross selling products, cannibalization is similar in the opposite direction. This means that you have a product that is causing other products to suffer. It could mean that you have a basic product and an upgraded product. While many customers may choose the basic product because of the lower cost, you may see an increase in your profit when you take that basic product away and only offer the upgraded one. Your sales may take a small hit, but you will still end up making more.
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Before you make that decision to keep a product or discontinue it, it is important that you look at the numbers. Without a company like Mark Dicus & Company, it can be difficult to see a clear picture of what those numbers may be. We will help you keep up with your accounting and bookkeeping needs so that you can effectively chart the growth of your business and your products. Call us today!