In this article Retail Business Consultant, Catherine Erdly shares why ‘Hero Products’ are imperative for the success of your small business and why 80% of your incomes comes from just 20% of your range.
When you review your sales, have you ever looked at not just how much everything sells, but how much your best sellers take as a percentage of the total sales?
If you haven’t done it recently, pull up your sales by product for the last 3 months, and take a look at how much money you are taking from your top sellers.
Chances are, most of your money comes from just a handful of products
It is entirely likely that 80% of your sales are coming from 20% of your products. This is the 80/20 rule, also known as Pareto’s Principle.
Your best sellers will take far more money than your slower sellers.
Or looking at it the other way, 80% of your products will only take 20% of your sales combined. These lower selling products are known as “the tail” and one of the key ways you can manage your cash flow is to keep the stock that is tied up in the tail as low as possible.
Pareto’s Rule applies to most business, of all sizes
The 80/20 rule for product sales is something that holds true for a small lifestyle business with 20 products or a major retailer with 26,000 SKUs. I’ve run this analysis in every business I’ve worked in, and it is always true, or at least close.
It’s not just interesting to know which products are your hero products, it’s essential. If these lines are providing 80% of your sales, you want to be managing these much more closely than the tail.
You should be devoting the majority of your time that you spend on stock management making sure that you have got enough of your hero products, and that you are doing enough to promote them.
There is a misconception that you should be featuring products that aren’t selling in order to get them moving.
While you want to be featuring your whole range in rotation, you want to focus your marketing, social media and homepage on your hero products. Showcasing your proven best sellers will give you a much bigger sales increase than pushing products that aren’t already selling.
But don’t rest on your laurels.
You need to be monitoring your hero products and promoting them, but just because they are your hero products now, it doesn’t mean that they will be forever.
You also want to get really clear about WHY these products outperform your others. Is it the colour? The price point? What is your customer using it for? All of these questions are important for you to understand because you’ll need them to help you select your new hero products.
The best time to find your next best seller is when your current one is still selling really well.
Even the very best products will eventually start slowing down – maybe after six months, a year or longer. But that day will come, and when it does, you want to be ready.
You don’t always have to reinvent the wheel. It could be that you bring in new colours, new formats, new sizes or find other ways of refreshing your best sellers. But it’s always a good idea to have new versions that you are planning even while the current hero products are still selling well.
Ultimately, hero products are what make or break your business. They provide you with a decent flow of sales and are probably paying your bills.
Keep looking after them, monitoring them, showcasing them to your customers while at the same time planning for your next hero products, and your business will flourish.
Catherine offers an incredible 1:1 session to help you analyse your sales, identify and grow your profits. Connect with her on Instagram or contact her for a 1:1 session quoting “small and mighty”.
Catherine is the founder of Future Retail Consulting and is on a mission to help people create the life they want by growing successful product-based businesses. She helps them make money by developing a clear strategy focused on their product offering, their pricing, and their sales channels.
Catherine brings nearly twenty years of industry expertise and an inspiring passion for product businesses.