Product Portfolio Analysis - Turnover and Profitability

To analyze a portfolio's products, each type of product must be marked with its turnover and profit value. The calculation of earnings must be carried out while also taking into account all of the business's general expenses. This task is usually handled by the finance department.

Using the profitability and turnover values of separate products (or categories), product managers can analyze the position of a particular product relative to others, and relative to the average profitability of the business as a whole.

A scatter diagram can visualize the products' data. Four quadrants are formed, in which products are represented as points:

  1. Star products. Products with high turnover and high profitability.
  2. Niche products. Products with low turnover but high profitability.
  3. Traffic-generating products. Products with high turnover but low profitability.
  4. Loser products. Products with low turnover and low profitability.

Niche products may be products that are at the beginning of their life cycle, or products that are in demand within certain business sectors or in regions with a unique competitive situation. They provide interesting possibilities for sales development - the potential to forge a strong connection between traffic-generating and niche products. Investments in training sales managers to effectively connect dormant goods to traffic generators can bring a significant increase in profitability. It is necessary to conduct a sales quality analysis and service quality analysis via the Mystery Shopping methodology, and likewise to analyze the sales funnel for all sales divisions or individual sellers.

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