Chapter 5
Expanding Products to Increase Stagnant Sales
IN THIS CHAPTER
Determining when to modify your line of products
Restructuring your inventory
Testing the waters for the best replacement inventory
If you own a mature online business, you must master two tasks to maintain success. First, you have to nourish (or feed) your site in a way that keeps it healthy, productive, and growing. Second, you have to perfect your timing by creating a feeding schedule for your site and recognizing when it needs nourishment and care to expand.
The sale of products (or the lack thereof) is a good indicator of how well you’re doing on both counts. If your site has been around for a while, you know that stagnant sales say a lot about your online business — and what they say usually isn’t good.
If that’s your situation now, this chapter is for you! We explain how to fine-tune the feeding schedule, adjust your inventory, and change your product mix to rev up your sales — at the right time.
Figuring Out When to Expand Your Product Line
With inventory, you’re never deciding whether to drop a product; rather, you’re deciding when to do so. Think about the last time you went grocery shopping. Did you notice that most food items had sell by (expiration) dates stamped on their packaging? If a product’s sell by date has passed, the product shouldn’t be purchased. Instead, it’s eventually replaced on the store’s shelves by a fresher product.
Most products (food or otherwise) have expiration dates, or at least life spans, because at some point, for whatever the reason, products are no longer valid. In marketing terms, a product’s life span is referred to as its life cycle (see Figure 5-1).
FIGURE 5-1: The four stages of a product’s life cycle.
Typically, a product’s life cycle is defined in four stages:
- Start-up: As you introduce a product to the market, you’re defining the product’s place among your customers and building awareness for it.
- Growth: In a product’s expansion phase, you’re increasing sales, developing the customer base, and exploring alternative markets for growth.
- Maturity: When a product hits its prime, you have to protect its market share. You might notice more competitors at this stage. After a product hits its peak, try to eke out profitability for as long as possible.
- Exit: In a product’s stage of decline, its sales are steadily decreasing and interest in it has waned. You have to decide what to do with the product — eliminate it, repackage it, or update it.
Not every product experiences all four stages of development during its life cycle. A product can move directly from the start-up phase to the exit phase, for example.
You can follow the upcoming steps to plot revenue and help determine when to phase out one product and introduce another. You have to decide when to drop a product, however. Unlike food items, not all products have sell by dates stamped on them. Your job is to determine when a product is past its prime. A logical starting point for determining when a product has outlived its shelf life is to conduct an inventory analysis. When you’re ready to start this process, follow these steps:
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Make an exhaustive list of all your current product offerings.
If you stock products, you can use a recent inventory list for this step. The most important task is to make sure that your list includes every product you offer on your site. Make a few notes about each product. You can include details such as
- Product locations on your website
- Product-specific promotional offers or coupons
- Other sites that link to specific products
- Ads or reviews that mention specific products
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Plot the sales history for each product.
You should chart sales weekly, monthly, or annually. We suggest reviewing monthly sales over the past year. For older products, you can then chart annual sales for the preceding 2 or 3 years. (Likewise, for newer products, you might want to break the total monthly sales into weekly figures.)
When you’re tracking a product’s sales history, show the data in the form of bar graphs, line graphs, or other types of charts so that you can more easily visualize the product’s progression in your overall inventory. - Determine the percentage of sales for your inventory, by following this method:
- Divide the annual sale (in dollars) of the product by the total annual sales for all products.
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Multiply that number by 100.
Your equation should look similar to this one:
$7,525.00 (product X) ÷ $72,346.00 (total sales) = .10401 × 100 = 10.41%
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List the products in descending order.
The list is then organized from highest to lowest percentage of sales.
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Match one of the four stages of the life cycle to each product.
For example, products with sales that have steadily declined and account for a lesser percentage of your sales are probably in the Exit stage.
By the time you complete your list, you should see a clear picture of your inventory that shows how much, or little, each product has aged.
Limited appeal products
Just as some consumable products have a limited use, other products have limited appeal. Usually, you know that these products are temporary fads and that demand for them will wane after their novelty wears off.
Unless you’re at least a certain age, you might not realize that someone once made millions of dollars by stuffing a rock into a box and selling it as a Pet Rock. Other examples of trendy products are T-shirts, bumper stickers, and coffee mugs printed with catchy phrases that reflect a current event. If you were selling a shirt with a witty slogan about the 2012 presidential campaign, for example, it naturally had a limited life cycle and should be replaced.
Limited-use products
Before you axe all the products classified in the exit stage, as we describe in the preceding section, you have to consider a few other factors. As you might expect, sales history isn’t the only indication of how well an item is selling or why its popularity is declining.
Some items — such as food, diapers, razors, or pet care products — have limited uses. After a product is consumed or applied, for example, it’s all used up. Theoretically, this type of item should maintain a steady stream of sales because customers must replenish it.
If sales drop steadily, you have to consider the possibility that other factors are in play — for example, product quality, customer service, branding, or awareness (such as whether customers remember that they ordered a product from you).
Technology-based products
As technology advances, products become dated or defunct or their appeal lessens. If a new version of a technology-based product is released, the earlier edition can automatically be doomed for the clearance bin. Do your customers really want to purchase the Xmark1000 from you when they can have the advanced Xmark2000 for just a few dollars more?
Auxiliary products can force this change, too, as in the case of video games and game systems. The release of new games often coincides with the release of an updated game system. The catch is that the new games are compatible with only the new system. If the video games are popular enough, they drive sales of the updated game systems. In turn, the popularity of the earlier game system declines. Although the original system can take a while to become truly extinct, its value and marketability decrease.
Another example of auxiliary products changing has to do with smartphones. As Apple, Samsung, or other providers roll out new phones, these devices typically require new power chargers, carrying cases, and other auxiliary devices that are no longer “backward compatible” with older versions of the devices. Just like with video game systems, the sale of older device’s auxiliary products can take a while to decline, but over time, most people will either upgrade or switch product lines.
You might decide that this type of product is in its final stage and should be replaced. Or, you might view it as a product entering its mature stage and decide to market the older system to a customer base that’s more concerned with price and function than with the latest, greatest technologies.
Product marketing
Your marketing or promotional efforts can expand or shorten a product’s life cycle. In fact, the theory of product life cycle is a marketing concept that’s typically used in developing marketing campaigns for new products. By using the product life cycle concept, marketers can better respond to each stage of a product and increase (they hope) the overall product life cycle and its revenue.
Find out what you can do to prevent a decline in your product sales. Think about whether you actively promote products, and how often and in what ways you promote them. Before scratching a product from your inventory list, you might need to reevaluate your promotional strategy for that product.
Product positioning
Product positioning influences a product’s sales and life cycle. Think about the physical location of an item (or, rather, its image) within your website. Do you rotate multiple products into premium spots on your site? Is a product positioned with similar items so that shoppers can easily find it? Or, is the product buried deep within your online store, waiting for someone to stumble over the right link? Even if a product is popular, if customers have trouble getting to it, your sales will suffer.
Price points
Setting the correct price for your product is essential. You can bet that a product that’s priced incorrectly from the start will go straight to its exit stage in no time flat. As a product matures, though, its pricing also must be reevaluated.
Conversion rates
By using e-commerce (and effective analytic software), you’re in the unique position of being able to track almost all your customers’ movements, not just those initiating from ads. It’s the equivalent of following someone around your store and watching as she picks up an item to look at it and then puts it down and moves on. You don’t know exactly why she didn’t buy it; you just know that she didn’t. Online, when you direct a customer to a particular product page, you count it as a visit. If the visitor purchases the product, you count it toward a positive conversion rate.
You contribute to a higher or lower conversion rate for a particular product. Your site-design decisions, linking choices, and marketing efforts all factor into a conversion rate.
Suppose that your product has a history of low sales. You do a little research and find that even though the number of visitors to the product page is decent, the conversion rate is quite low. Do you cross the product off your list? Not yet.
Before you write off a product as a nonproducer, double-check all factors that affect the conversion rate. Here are two suggestions:
- Take a closer look at the product page. Determine whether the page has enough information to allow a customer to make the decision to purchase — whether size and color options and the price can be quickly obtained, for example. Some critical details might be omitted from the description, or the product photo might be small or fuzzy or cannot be enhanced. These factors can cause a potential buyer to remain a window shopper.
- Track all pages that link to the product page. Find out, for example, whether customers expecting to find one type of product are finding a much different product when they click through to checkout. You don’t want them to believe that they were misled or oversold.
Take a look at Book 6, Chapter 1 to find out how to calculate the conversion rate.
Replacement or Expansion: The Art of Culling Your Inventory
When you decide to drop products that aren’t selling well, you can take two approaches to adjust or refresh your inventory, as described in the following two sections.
Replacing one product with another
One strategy for refreshing your inventory is to replace nonperforming products: Get rid of one product and immediately substitute it with a new one. Your replacement products should meet these criteria:
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They’re complementary. Look for items that are a good fit with the theme or focus of your site. You want products that continue to be relevant to your target customer.
Resist the temptation to add products that require marketing to an entirely different customer base. That’s almost the same as starting a brand-new business, and it can permanently derail you. -
They’re price competitive. The price points of replacement products should be within the range of your current pricing structure. You don’t want to introduce a high-end luxury item if your site is more of a midrange store. Similarly, you want to search for products that can be competitively priced on the general market. If you can find the product from other online sources for significantly less cost, you will have difficulty competing.
Always compare prices before adding products. PriceGrabber (www.pricegrabber.com) lets you view current rates online for a particular item. Or download a price-comparison toolbar, such as PriceBlink (www.priceblink.com), which you add to your browser. PriceBlink automatically displays comparison pricing and relevant coupons when you search for products online. - They’re appropriate for markup. Choose products that are priced right for you, too. An item can be costly to you if the wholesale price is too high, or if you have to buy a really large quantity to make the price feasible. These items throw off your normal markup strategy and leave you paying for it — literally!
- They’re deliverable. When you search for products now, the world is truly at your feet. You can send anything from almost anywhere and then resell it. If delivering a product to your customer becomes difficult or takes too long, however, it costs you business. Your site should feature products that can be quickly shipped to customers without hassles or delays.
Expanding your product line
You can refresh your inventory by simply expanding it. Here are a few expansion tactics:
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Concentrate on expanding a particular product line. Perhaps your inventory analysis reinforces what you already suspected: One particular brand of products sells particularly well. Suppose that you’re a reseller of spa products (hair and skin care) and you realize that the three Bumble and Bumble brand products on your site consistently sell well. After dropping your five worst-selling products, you decide to expand the Bumble and Bumble line. You have no reason to search for other brand-name products; just build on the one you already have.
Expanding on a popular line of products is also a useful marketing opportunity. Make the most of it. Promote not only the new products but also the fact that you’re expanding the entire brand. -
Accessorize your bestselling products by adding items that complement one of your top products. Perhaps you sell electronics and games and find out that the Xbox One game system by Microsoft is one of your three best-selling products. When you beef up your inventory, concentrate on Xbox companion products. You can expand your line of Xbox video games, memory cards, controllers, and any other items that work with it.
Accessorizing is similar to the promotional strategy of upselling. When you see a product that your customers want, add supplemental products that might also interest them.
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Scale back the number of your products. This strategy narrows your focus so that you can concentrate on a select group of your top sellers, no matter which brand or category they’re in. In other words, eliminate the dead weight. Then start promoting the heck out of your best-performing products to increase sales.
For example, you might have 75 items for sale, and your inventory analysis shows that only a dozen of those products make up a clear majority of your sales. Combined, the other 63 items account for fewer than 15 percent of your total annual sales. If you get rid of the majority of your products and stick to the 12 bestsellers — along with marketing — you should see sales increase without the hassle of working with a large number of products.
Finding New Products
No matter what strategy you use to replace products, you first have to find new ones that shine. Fortunately, you can look in certain places to narrow your choices:
- Vendors: If you already work with regular suppliers, ask them what’s selling. Your vendors know which items they can’t keep in stock because of demand and which ones are lagging. Suppliers usually have a good idea of which type of new products are coming in, and can suggest ones that fit well with your site.
- Customers: Your customers know best. Or, at least they know what they’re willing to spend money on. Do a little online polling or send a short e-mail survey to find out which products your customers want to see on your site. They’re usually quite willing to share an opinion or two.
- Competitors: Check the clearance section of a competitor’s site to see which items didn’t sell, and take a look at deeply discounted items to see which items might be on their way out. Don’t forget to see which items are being heavily promoted.
- Social media: Nowadays, public opinion is easily measured by studying your social media channels. From Facebook and Twitter, to Instagram and Pinterest, see which products are getting referenced, liked, and shared with individual people’s followers. Keep an eye on the conversations being generated as well.
- Online blogs and product sites: A wide variety of blogs and sites are dedicated to every type of product. Often, these websites will include announcements about new products as well as rumors.
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Trade shows: These events are filled with product distributors showcasing their latest product offerings. Often, you can even detect a theme for upcoming releases. For example, you can see which colors are hot or which product categories distributors are pushing. Not surprisingly, manufacturers are all usually pushing the same items, so you can easily spot the next trend.
Trade shows and markets are also an opportunity to chat with suppliers and gather detailed information. The atmosphere is much more casual, and distributors and members of their sales force are eager to talk.
Of course, after you make your decision about which products to add, the real proof is in the pudding (as they say). With that proverb in mind, it certainly doesn’t hurt to literally put your judgment to the test. You can run online tests for a product by using one of these methods:
- Forced placement: Try featuring only a single product on your home page. This strategy forces visitors to view the new product so that you can more easily monitor click rates and conversions when you’re introducing a product. If you’re uncomfortable promoting one item, you can also place the promotion in a premium spot on your home page.
- Rotate promotions: Alternatively, you can run internal promotions on your site and rotate new products with your popular staple items. Use banner ads, pop-up ads, product reviews, or testimonials, and then rotate the promotions throughout your site (not just on the home page).
- E-mail customers: Introduce new products in an e-mail campaign to your targeted customers. That way, you can quickly gauge customer reaction to your latest product selection.
- Keywords: You can also place external advertisements to drive visitors for product testing. The most effective method is paid keyword searches. Because these target visitors are already searching for your particular type of product, or something similar, this method is an effective way to test the waters for purchasing behaviors.
- Sample offline: Give a few samples to friends or family members, and ask whether they would buy the product or have bought one similar to it already. If so, find out where and for how much. You can even have an informal focus group check out your product online. You can watch as its members visit your site and search for the new product. Find out from them what they think of your product, whether the promotion you used was effective, and whether the product image on your site accurately portrays the product. Honest feedback offline can help put you on the right track online.
Even a well-researched and thoroughly tested product isn’t a sure bet. However, implementing these strategies as part of your product expansion truly helps you beat the odds.