When to reduce product options
/What are Product Options?
Product options are variations on the same basic product design. For example, a product might come in a variety of colors and sizes. As an example of more complex product options, an automobile might be offered in different interior and exterior colors, with or without leather seats, different wheel sizes, and with different window tinting options.
The Problem With Too Many Product Options
The marketing department wants to offer as many variations on a product to customers as possible, in order to fill every conceivable product niche and thereby increase sales. Unfortunately, this presents the following problems:
Increases the inventory investment. A large number of components and finished goods be kept in stock, so that the company will have each product option available for sale.
Increases inventory obsolescence. Some production options will be ordered so rarely that the company finds itself sitting on the related inventory items for long periods of time. If so, the company may find itself investing in too much inventory, while also being at high risk of having to write off inventory as being obsolete.
Reducing Product Options
To reduce the chance of these problems occurring, reduce the number of product options being offered for sale. Doing so shrinks the amount of components and finished goods kept in stock. This approach does not mean that the business will offer only the most rudimentary product configurations; a feature-rich product may be offered, but with only a modest number of variations on the basic design. In essence, management wants to strike a balance between having a moderate investment in inventory and giving customers a sufficient range of choices to keep them from buying the products of competitors.