Product Proliferation Can Kill Your Sales Team

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Are your products and SKUs multiplying like rabbits?

Many companies today have so many different product names, options, bundles, SKUs and configurations that no one can keep them straight.

How bad is this SKU proliferation problem? We’re hearing about it from almost every sales team we encounter.

Small wonder. Peruse leading companies’ product lists or shelf displays and you’ll find:

Fierce Melon vs. Orange Strawberry

What’s the precise challenge with having too many product variations? Well, when my wife was pregnant, she was dehydrated and liked to drink Gatorade. Once, not finding her preferred flavor, Fierce Melon, I bought Orange Strawberry instead; it was the same color. But she hated it. One product proliferation problem, then, is that it can confuse customers.

In fact, SKU proliferation often leads to numerous business challenges, including:

  • Slower sales: When salesperson must pause to determine exactly how products or bundles differ.
  • Poor price control: In some organizations, salespeople use product bundles to circumvent price controls, undercutting the bottom line.
  • Unclear financial insights: How do you accurately compensate salespeople, assess sales effectiveness or create sales forecasts when you have to first decode many different product or bundle variations?
  • Service and support complexity: What’s the difference between product version 1.0.2.3 and the 1.0.2.4 release 2 contained in the 2013 Small Enterprise Bundle? Variations and configurations slow and complicate service efforts, at no small risk to customer satisfaction.
  • Higher costs: Manufacturing, marketing, selling and supporting too many similar products reduces efficiency and increases costs.

SKU Proliferation: Who’s at Risk?

These challenges can affect any organization that manufactures physical goods or sells services. Pretend you’re Monster.com, for example, selling job postings. Seems simple, right? Well, maybe you want to offer bold results for searches. You want to offer job bundles—get a discount for buying five job listings. Then you have options to list jobs in different geographies, cross-list in different categories, or syndicate job listings in local newspapers. Very quickly, naming and tracking these product options, without letting the naming get out of hand, becomes challenging.

Marketing Gone Wild

Who’s responsible for the SKU proliferation problem? Product marketing. Its job is to sit around all day and dream these things up. Marketers want enough product options to capture all of the potential buyers,. The best companies will tightly match new products to carefully defined segments, often based on carefully built focus groups.

Too often, however, product marketing people justify their jobs by creating a new product every three months, or creating unnecessary variations on the same theme—in the words of Unilever’s former chief marketing officer, exaggerating complexity. But do the opposite, he says, and you have a sure-fire way to reduce marketing costs, starting by having to create fewer global advertising campaigns.

You Had Me at “Overnight”

Great product marketing messages err on the side of simplicity—”When it Absolutely, Positively Has To Be There Overnight.” Likewise, companies benefit when they know how to give customers something they want, without the window dressing. For example, back in the 1990s, my first company, Open Environment, sold middleware software. Originally, we offered 20 different middleware products—connectors for different applications and systems. Each connector sold separately, for $4,000.

But why not, I proposed, bundle the products together and sell them all for $10,000? We did, and in short order our sales volume doubled—and of course revenue went way up too. Because even though most companies only needed one connector, they were happy to have the others too, just in case. From a product-naming standpoint, however, we still had just one bundle, containing 20 unique connectors.

Control SKU Proliferation

Regardless of how many products or bundles you sell, the best practices for preventing and managing SKU proliferation, as well as managing a product master—the master plan for a product or product line—are the same:

  • Set and enforce pricing and product designation policies, including how to define a product master.
  • Standardize bundling and configuration practices.
  • Restrict new SKU generation.
  • Name products and bundles consistently.
  • Track products and versions post-sale.

For maximum effectiveness, enforce all of the above from within the CRM system. (Caveat: Some organizations will opt to store product masters in the ERM system instead, and then integrate it with the CRM system.)

Don’t Make Salespeople Stop and Think

My position on product, option, configuration, and bundle naming is simple: Pushing anything that makes a salesperson stop and think is counterproductive. Don’t make them analyze which bundle will be a better fit for their customers or generate a better commission. Keep it simple. Help them sell.

Learn More

Cloud Sherpas is one of the world’s leading cloud services brokerages and helps businesses adopt, manage and enhance their CRM investment by identifying desired business goals, finding the right tools and technology for the job, and delivering rapid implementations that remain focused on achieving the desired business capabilities.

Post and thumbnail photos courtesy of Flickr user Don Johnson 395.

Republished with author's permission from original post.

Adam Honig
Adam is the Co-Founder and CEO of Spiro Technologies. He is a recognized thought-leader in sales process and effectiveness, and has previously co-founded three successful technology companies: Innoveer Solutions, C-Bridge, and Open Environment. He is best known for speaking at various conferences including Dreamforce, for pioneering the 'No Jerks' hiring model, and for flying his drone while traveling the world.

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