Sunday, May 10, 2009

Do You Have Your Hat on Backwards?

In today’s tough economy you have done your due diligence, thoroughly analyzed your income and out go, and sorted your numbers every which-way. You have discovered that your Widget A only accounts for 12% of your business. Should you drop this product line?
WAIT! There are other areas to consider before you pull the plug. Have you done a full analysis of the total potential market? You are likely to find that although Widget A only represents 12% of your business, it actually represents 90% of the total market. Whether by design or happenstance you have discovered a niche and filled it. This has long been the mantra of product designers and sales teams-“find a niche and fill it.”
With this knowledge on hand would you still want to pull the plug on Widget A? What are the chances for add-on sales of your other products? Are your Widget A customers likely to recommend your to their friends and associates? How much of the infrastructure of Widget A overlaps other products in your line? It may only represent 12% of your income, but how much of your outgo does it represent, probably a lot less than 12%.
A major car manufacturer I worked for several years ago made just this mistake and has never been the same since. These are all questions they should have asked as part of their strategic planning analysis. Your Widget A may not be your most profitable product, but it may have a great value to you in the whole scheme of things, in capturing extra business, or in just filling a need that nobody else is able to do, thus making you a hero and a successful commercial enterprise.
A lot of the success of your business will depend on this balancing act. It is critical that you due your due diligence, but not make any decisions until you look at the picture from both sides, yours and the client’s.

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