How To Know When It's Time To Drop A Product
You’re probably most excited and passionate about a new product when you first introduce it to the market—especially if it’s something you really believe in. But your love for something is not always the best indicator that consumers are ready to make the commitment to buying. And oftentimes business owners see their product through rose-colored glasses, long after sales have started declining, making it difficult to determine its viability objectively. So how do you really know when it’s time to drop a product?
As a business owner it’s important to use data to help avoid romanticizing a product’s performance. If you’re unsure how to determine if your product is more work (or money) than it’s worth, consider these three questions to get you started:
1. Are People Actually Buying (And Keeping) It?
One of the first considerations before deciding to drop a product is whether it’s actually something that people are buying. This may seem like an obvious statement, but you’d be surprised at how often entrepreneurs refuse to call it quits on something solely because they love it themselves. It’s easy to believe in something, to know that it’s a great item, but to introduce it to the market when it’s just bad timing.
While consumer interests and market demand are constantly changing, it’s especially important that a product be released when people are actually ready for it. For example, many products and services (that have since been successfully reintroduced by other companies) have flopped for being too far ahead of their time, including LiveJournal, Palm Treo, and Nintendo Power Glove. If further consumer discovery research were utilized, these companies may have postponed release or developed their products in ways that consumers may have been ready for at the time of launch.
Another factor to consider in deciding to keep a product around is whether or not consumers buy, and then keep, the product. Having too high a return rate will not only cost your company money, but also can be detrimental to your reputation. If your QA is N/A, it may be time to change directions.
2. Does It Cover The Costs Required To Make It?
Perhaps the most obvious one to ask, this question can become difficult to answer depending on the variables involved in a product’s cost. Not all costs tied to a product are black and white. For example, there are probably very obvious variable costs involved in creating a product. These are things like materials and labor, both of which would likely increase as the number of products created increases.
However, there are often fixed costs (both direct and allocated) that come with operating every business. These include expenses such as rent and insurance, which will stay the same no matter how many products you sell. These costs should always be included in your decision to drop a product. Even if your product’s variable costs are not being covered, there is still a chance that removing that product line may hurt your bottom line if fixed expenses are not covered. A more in-depth explanation of this concept can be explored here.
3. Are There Complementary Product Opportunities?
You may already know that a particular product line is not performing well. While it’s often hard to see the light at the end of the tunnel in this scenario, there may still be opportunity for increased sales with the introduction of a complementary product or service line. Before dropping a product, think about other ways to creatively market your product alongside additional products and services.
A classic example of this is seen with the company Square, a $30 billion payment-processing software. As a standalone service, payment processing has been around for years. But what set Square apart and launched them to the forefront of the industry was the introduction of their complementary product, the handheld credit card reader. Now, this accessory, as well as their other, more complex payment processing hardwares, are commonplace accessories seen at shops, small businesses, and even craft fairs all over the world.
+ Evaluate Your Marketing Efforts
Sometimes a product just flops because of bad marketing. If you’re not getting your message across clearly, or even speaking to the right audience, your product is probably not going to perform very well. If this sounds like you, you could probably benefit from a marketing and social media strategist. At Ivy + Atlas, we’ve worked with entrepreneurs across dozens of industries to teach marketing and content strategy, rewrite and rework branded messaging, and find the best ways to digitally reach ideal customers. For more information about marketing consulting or to hire a social media coach, contact us here.