Page 354 - Introduction to Business

328 PART 3 Marketing

companies have and the large amount of data needed for each, computer involve-
ment is a must. The process for analyzing products needs to be formalized in writ-
ing. And a definite sequence of steps needs to be identified.
1. Periodically monitor products. This step involves collecting comprehensive
data for each product, including product revenues in units and dollars, costs
associated with each product, market share, inventory levels, and prices
charged. From these data it is possible to compute important performance
measures for products. For example, dollar revenues can be matched against
costs to determine product profitability.
2. Assess product performance. The data collected from the monitoring step
should be used to assess product performance. This means comparing how
the product is doing with the objectives established for it. Thus, its actual
return on investment would be compared to the desired return, and so on.
Even though a product’s performance may exceed the levels established for it,
management should be wary of developments that suggest future problems,
such as declining sales, introduction of a superior competitive product, and
price declines required.

3. Elimination or retention decision. After assessing the product’s performance,
management must decide whether to eliminate or retain the product. Most
products will undoubtedly be retained. Those that fail to achieve a large num-
ber of their most important objectives, especially profit, should probably be
dropped. This assumes that management cannot develop strategies that will
make the product’s performance acceptable.

EXHIBIT 9.6
Implementing the Elimination and Retention Decisions

Factors to Consider When a Product Is to Be Eliminated
When should the product be eliminated?
To what other products will the freed-up resources be assigned? When should
they be reassigned?
Should the current inventory be sold before the product is eliminated?
Should customers be notified about the elimination? When should the notice
go out?
What should the notice say?
Should orders be filled after the day for elimination?
Are any laws or contractual agreements being violated?
Should customers be allowed to return units of the unsold product?

Strategies to Consider When a Product Is to Be Retained
Should the price be increased or decreased?
Should the promotional budget be increased or decreased?
Should the product be modified or should the quality be improved?
Should the channels of distribution be changed?
Should the advertising media used be changed?
Should the product be marketed to new market segments?
Should different modes of transportation be used?
Should the sales force effort for the product increase or decrease?

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