Today, we are going to be diving into how to streamline your product portfolio.
I see this mistake that product makers so often make because they are offering the gamut in their product portfolio.
When in reality, when you offer less, it will help you sell more.
Decision fatigue is costing you sales when you have a large product portfolio
A lot of people don’t realize the psychology behind this, but when you have a broad product portfolio, it actually creates decision fatigue.
I want you to think about the last time that you made a purchase, whether it was big or small. You walked into a store, and you had a lot of options to choose from.
Did you actually make a purchase, or did you decide that you were going to think about it? And you went home, and you did your research, or you were afraid of making the wrong choice because there were way too many options.
I have done that more times than I would like to admit.
If you are one of those buyers that gets overwhelmed by a lot of options, some buyers are like, that doesn’t bother me at all. I’ll just make my decision and move on. But a lot of consumers, that creates decision fatigue.
And so, the more products that you have in your product portfolio, that is goiong to turn them off and overwhelm them.
When you, as a product maker, think that you’re doing them a favor, you’re giving them more options, but they’re overwhelmed, and a confused mind says no.
So, the chances of you making a sale just went down when you have an overly large product line.
So, I want you to think about, is your product portfolio too big?
Brand Clarity and Positioning: The Importance of Specialization in Your Product Portfolio
The second impact of a product portfolio that is too big, is it decreases your brand clarity and positioning.
When you have too many products, it really dilutes your brand message, and it can make it harder for your customers to understand what you specialize in.
They may even think that your brand is unfocused and they may perceive that you’re not an expert in any one area.
They may not see that you have a niche, and you may have heard the term, the riches are in the niches. And that is very, very true.
But when you have a very large product line, it can really dilute that niche.
So, I want you to think about how that creates an unfocused brand.
A scattered product line makes your marketing efforts inconsistent and so often confusing for your customer.
In addition, I have seen so many of my clients have decision paralysis as business owners because they’re constantly adding new products without a clear strategy.
So, they are feeling burnt out and have no direction in their business, much less with their brand or their marketing strategy.
The Financial Implications of too Much Inventory in Your Product Portfolio
The third impact is the high inventory cost and management challenges.
This is a huge one because it requires a lot of effort and resources to track, reorder and restock each SKU that goes into creating the product variant that you carry.
And then there’s hidden costs such as the storage and spoilage, if that’s applicable for the product that you are creating, or even just slow-moving items that are not your best sellers.
And so those items that might not sell quickly, they could be outdated or expired or they’re just unsellable stock.
Then you have to mark them down and have clearance sales or even write them off.
And then that is going to negatively affect your profitability.
In addition, having that wide variety of products can often lead to the smaller production runs, which just increases your per unit cost.
In addition, when you are not as focused on your core products, your best-selling products, it’s really less of an opportunity to improve your overall business efficiency.
Like negotiating with your suppliers for better deals, which is one of the things that I talk about with my wholesale students all of the time.
Negotiating with your individual suppliers to get your supply cost down.
This is something that so many product makers do not take advantage of, and it can simply be picking up the phone, calling your suppliers, and asking to purchase in bulk and cutting your cost of goods down, and that will greatly increase your profit margins.
Signs Your Product Portfolio Is Too Large
So, you may be thinking, all of this is great information. I can see the impact that having too broad of a product portfolio might have on my business.
But what are the signs that my product portfolio is too big?
These are good indicators that your product line is too big.
You might have sales data inconsistencies.
Some items sell really well, and then others are just sitting on your shelves collecting dust.
If you have inventory finished goods that are just sitting on the shelf collecting dust and you think no big deal, it’s not costing you money, it absolutely is. Talk to your CPA. That is costing you money. That’s the first sign, sales data inconsistencies.
Difficulty in managing production or sourcing materials
You should be able to source your materials in bulk.
And I know I just mentioned this, but when you have a core focus on great selling products, you should be able to source your materials, get them with a quick, consistent lead time, and know what your profit margins are.
And if you are having difficulty managing your production and you’re having to produce small batches of your products and you’re having trouble sourcing those materials, that’s a good indicator that your product line may be too big.
Another sign that your product portfolio might be a little bit too large is customer confusion.
If you are getting questions about the differences between some of the products in your line, that is a clear indicator that you have some overlapping products, and you can definitely retire some of those products.
So, if customers are asking you, I don’t understand the differences here, then it might be time to look at your sales data and consider retiring or getting rid of some of those product variants.
Another clear indicator is if you have some longer lead times in shipping out your products
Because of the complexity of managing multiple SKUs and product variants, that’s a great indicator as well. You do not want to have very long lead times.
That’s definitely going to dampen your sales.
And if you’re having long lead times because of the complexity of your production, then you definitely want to streamline your product portfolio.
So how do you do that?
Conducting a Product Audit
How do I eliminate products?
What products do I eliminate?
How do I streamline my product portfolio?
This is what I recommend.
And this does not have to be difficult, but so often, it is painful for us as product makers.
The first thing is to conduct a product audit.
And I recommend doing this not necessarily from a revenue standpoint, but from a profit standpoint.
Revenue is one thing, but profit is a whole different ballgame.
So, assess the profitability of each product.
Look at the customer demand and then the operational efficiency.
How much profit is each of your product variants bringing in?
What is the length of time it takes you to produce each of those units?
How many units of each of those products have you sold over the last 12 rolling months?
It may be more labor intensive to produce some products over others.
Production cost or labor cost should definitely be considered in your overall cost of goods as well.
You want to use those analytics and customer feedback to determine your top performing products.
What I would recommend if you have never gone through this exercise before, I absolutely recommend first time getting rid of your bottom 10% of your products.
It is very hard, but this is a good exercise to do, and your business will be healthier overall for it.
Now how do you move those products? How do you get rid of them?
Strategies to Eliminate and Move Products
Here’s a couple of strategies to move those products.
- You can bundle those slow-moving products with some of your best sellers to help move them and retire them.
- You can offer seasonal or limited edition drops instead of offering them as year-round availability.
- One of the things I often do instead of offering year-round availability, and I do this to test products to see if they are going to sell well, I will first launch them as a limited edition drop to test the market. So that is a pro tip for you.
- If you want to test a new product variant for your portfolio but really get customer feedback first, offer it as a limited edition drop, and if it really sells well, then you can incorporate it into your year-round portfolio.
- Anytime I add a new product to my product portfolio, I will usually retire a product as well. So, I’m not constantly growing my product portfolio. It’s just one in, one out.
Those are some easy strategies to downsize.
Bundle those slow-moving items with your best sellers, so maybe a free gift with purchase, and make sure that you’re communicating to your retailers that these items, these product variants are retiring, and you can even offer a limited time at discount for the remaining inventory and move those products out.
Move them out, retire them, and downsize your product portfolio.
And I would love to hear feedback if this helps you sell more because even for retailers and consumers alike, this will definitely help clarify your brand, your messaging, and what you are focused on for your best sellers.
It will help clarify for your customers, both retailers and consumers alike, what your best sellers are.
It will help you as a business owner as well focus on the important operational efficiencies for your business too.
This is one of those hard things as a business owner to put into practice, but your business will be overall so much healthier if you get into a regular rhythm of streamlining and auditing your product portfolio.
So, make sure that you conduct your product audit.
