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The revenue a business enjoys after meeting up with all expenditures is its profit. Thus by deducting the costs of goods we can realize the profit. Low product profitability is a problem when a product costs more to maintain than the revenue it returns. Bloated operating costs, inadequate income, or both result in low product profitability. Businesses with low-profit margins are vulnerable to sudden or unplanned loss. High-profit margin is a factor in survival strategies. Hyper-competitive industries force companies to adopt low-profit margins as it attracts customers. If the pricing strategy is improper, it affects the revenue. By reducing overhead costs like electricity, rent, salaries, and insurance we can avoid a crisis. Poor market research is also one of the primary reasons for the downfall.

Low Product Profitability
Placement

•    Suboptimal placement
•    Selling through non-ideal channels

Promotion

•    Bad ROI
•    Demographics imbalance
•    Improper target audience
•    Failed promotion

Product

•    Short life-cycle due to strategic threats
•    Average quality
•    Low value proposition
•    High production cost

  Price

•    Poor brand value
•    Nominal price

  Management

•    Poor planning
•    Inefficient workforce
•    Excessive overhead

Other issue

•    Impact of weather
•    Lack of demand
  • Market change
  • Low economic growth rate
•    Exchange rate
  • Depreciation of local currency
  • Reduced import volume
  • High import cost

Efficient and thorough root cause analysis helps us identify the genuine causes for low product profitability. This structured root cause analysis template holds the factors that affect the revenue of a product.

Who should use the Low Product Profitability template?

• Anyone who needs to find out the potential causes for a product being less profitable.
• Companies, and entrepreneurs who want to know the factors triggering less profit.

Why use this template?

• Investigate the reasons behind low returns.
•  Change this template using smartQED to find out the solution to the problem.
• Design your templates for different types of problem analysis in smartQED.

Curated from community experience and public sources:

• https://www.logile.com/articles/the-toolbox-volume-2-the-fishbone-diagram/
• https://www.economicshelp.org/microessays/profit/