The term "SKU reduction" is thrown around a lot these days, but it means different things to different stakeholders. To some, "SKU reduction" means simplifying a complex product portfolio. To others, "SKU reduction" means efficiently producing a complex portfolio.
Simplifying a Complex Product Portfolio
If your prospective customers are confused by the complexity of your product portfolio to the point where they don't buy (or buy less) because of its complexity, then you need to simplify that portfolio. You can do this by either dropping products or by bundling products and options together.
However, be aware that while a complex product portfolio might be a problem for your high-end prospects, the fact that your low-end customers were able to buy only the products and options they needed may be the only reason you have low-end customers. Complexity can be perceived as either choice or chaos.
However you get to the conclusion that your product portfolio is too complex, simplifying your portfolio cannot be done over night. Of course, you may have entered into contracts which commit you to provide certain product combinations into the future. But, more fundamentally, you may not even know who is using what product or product option and how they are using them.
Making the decision about what products and options stay, go, or become consolidated starts with knowing who is entitled to what products and options. It then proceeds to who has fulfilled, deployed, and configured those products and options. While it may be a challenge to even get that far, you can go further. Instrumenting your products with usage management technology can allow you to harvest information about the environment in which your product was deployed as well as when and how often it has been used. Usage management technology can even provide this information back to you through your multi-tiered product distribution channel. Visibility into any or all of the transactions mentioned above will give you the information necessary to decide how to reduce the complexity of your portfolio.
Next time: Part II—Efficiently Producing a Complex Product Portfolio