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Product-Line Strategy

Issue

Business Advisors A company had two main product lines one of which was five times larger than the other.  The company maintained separate sales reports for each of the product lines but did not have useful or accurate profitability for each product line.  As a result, the company did not have the information necessary to properly allocate resources and investment dollars between them.

Action

We began to set up the proper reporting and analytical tools to accurately account for profitability by product line from gross margin to EBITDA.  The new information revealed that the larger product line was not as profitable as originally thought and the smaller product line was much more profitable.  The company needed to change its strategy to increase top-line growth initiatives for the smaller product line.  As a result, we facilitated numerous top-line growth brainstorming sessions which identified new sales and marketing techniques and strategy to capture a larger share of this market.

In addition, the company also began a series of business reviews with the larger product line to dissect the root causes of profitability issues.  We enhanced the company’s current analytic tools to help identify and correct the issues surrounding its poor performance.

Results

As a result of the profit assessment, the company focused its attention on growth opportunities for the smaller product line including acquisitions.  The company began to see an increase in customer Profit Performance Assesment Toolproposals and inquiries as a result of the new sales and marketing techniques and strategy implemented from the brainstorming sessions.

Also, the company better understood the larger product line’s issues and began immediate corrective actions to increase its profitability.  This included changing its strategy on proposals and price policy.

Value

The creation of these analytical tools improved the company’s ability to proactively identify issues and make decisions to increase its profitability.  They now have a sustainable measurement system to monitor order activity, cost level and profitability for each product line going forward.


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