Let’s face it, the cost of maintaining a large number of SKUs is massive. Yes, we try to increase total share of market with line extensions, flavor varieties, size variations, price points and many other strategies. However, are we truly getting a positive ROI on these strategies?
Over the years, we have been asked by a number of our clients to examine and help manage their product lines. Below are a number of solutions we’ve developed to help you manage your lines. These line-management tools have been developed to reduce SKUs, optimize the current lineup or identify opportunities to expand your offerings. Inherent in each of these solutions is some fairly extensive tradeoff analysis. This allows us to model the extent of changes to your lineup, as well as forecast the financial impact of these changes.
SKU Optimization – Very simply, in a world where we have proliferated our lines past the point of reasonable line management, we need to know how to simplify. MSI has developed a method of identifying the total line impact of systematically deleting SKUs. We do this by measuring where the share goes when a SKU is deleted. We identify the total business impact of a wide number of SKU deletions.
Size and Price Optimization – Similar to SKU optimization, the same overall approach can be employed to look at the impact of price increases versus downsizing. We can forecast the financial impact of both strategies.
SKU Opportunities – As we begin to leverage successful brands or lines, there are opportunities to add additional SKUs. Our approach to line management has also been applied to looking at a number of line extensions and identifying the opportunities that will lead to the greatest return.