Maximise Your Profits: Step-By-Step Guide
Aug 9, 2024
It's important to regularly analyse your product portfolio to identify any low-performing products that may be dragging down your profits. By doing so, you can determine which products are worth keeping, which should be re-evaluated, and which need to be removed from your inventory altogether.
Here's a step-by-step guide on how to analyse your current product portfolio and identify low-performing products.
Step 1: Define Your Metrics
Before you can begin analysing your products, you need to define the metrics that you will be using to measure their performance. These metrics may include:
Revenue generation
Sales velocity
Profit margin
Total Advertising Cost of Sales (TACOS)
Customer reviews and ratings velocity
By defining your metrics upfront, you can ensure that your analysis is objective and consistent.
Step 2: Gather Your Data
Once you have defined your metrics, gather the necessary data for each of your products. This may include sales data, profit and loss statements, customer reviews and ratings, and inventory reports. Amazon is not an easy platform to collect and consolidate data from, there are over 35 reports needed to accurately track these performance KPIs. That is why we recommend to use 3fin.io, which offers an easy to use solution to gathering and consolidating Amazon performance data.
Step 3: Analyse Your Products
Now that you have your data, it's time to start analysing your products. Begin by sorting your products into three categories:
High-performing products: These products are your best-sellers and generate the most revenue and profit.
Medium-performing products: These products sell reasonably well, but may not generate as much revenue or profit as your top performers.
Low-performing products: These products have low sales volume, low profit margins, and/or negative customer reviews.
Once you have sorted your products into these categories, you can focus your analysis on the low-performing products.
Step 4: Determine the Root Cause
For each low-performing product, you need to determine the root cause of its poor performance. This could be due to a variety of factors, including:
Poor product design or quality
Unoptimised pricing
Lack of marketing and promotion
Inadequate distribution channels
Intense competition
By identifying the root cause, you can begin to develop strategies to improve the product's performance.
Step 5: Decide on a Course of Action
Based on your analysis, you need to decide on a course of action for each low-performing product. This could include:
Improving the product's design or quality
Adjusting the product's price
Increasing marketing and promotion efforts
Developing new distribution channels
Discontinuing the product altogether
Your decision will depend on a variety of factors, including the product's potential profitability, the cost of improving the product, and the competition in the market.
Step 6: Implement Your Strategy
Once you have decided on a course of action, it's time to implement your strategy. This may involve developing new marketing materials, adjusting pricing, improving the product design, or discontinuing the product altogether. Be sure to track your progress and adjust your strategy as necessary.
By regularly analysing your product portfolio and identifying low-performing products, you can ensure that your inventory remains profitable and competitive. With a little effort and analysis, you can build your product portfolio and increase your overall profitability.
