Range structure: removing the complexity that no longer creates useful choice.
Key distinctions
Three conditions before calculating.
Additional contribution
The margin of a reference is not its portfolio value. Sales displaced from neighbouring offers must be removed, and the contribution recoverable if the reference disappears must be added.
Avoidable complexity
Forecasting, minimum production runs, storage, content, training, discounts, errors and support create costs per reference. Only the costs genuinely avoidable after withdrawal count in the decision.
Value of choice
Two close references can nonetheless reduce a perceived risk, cover a constraint or create a legible price step. Functional overlap alone is therefore not enough to conclude.
Method
Rationalising the range without confusing sales with value
- 01Map the uses
Attach each reference to a segment, a job to be done, a service level and an observable reason for choosing it rather than a neighbour.
- 02Rebuild the contribution
Calculate net price, variable costs, channel cost, service and avoidable complexity per reference over a common horizon.
- 03Estimate the migrations
Separate sales transferred to another reference, sales lost to a competitor and demand abandoned, then value each flow with its future contribution.
- 04Test the target range
Compare net contribution, segment coverage, legibility, operational risk and dependence on a single reference before withdrawing definitively.
The portfolio before and after rationalisation
Each item is positioned by contribution, usage overlap and complexity cost. Migratable sales are separated from sales genuinely lost.
Withdrawing two references increases contribution by €112k
Two tail references generate €96k of contribution but €140k of avoidable complexity. Migration studies expect €68k of their contribution to be recovered by three retained offers.
Portfolio change = complexity savings €140k + migrated contribution €68k − withdrawn contribution €96k = +€112k.
The withdrawal is favourable if the retained offers absorb the volume without degrading service or price. A regional pilot must verify the migration before generalisation.
Acceptance conditions
What must be true to act.
- 01
Each reference has a distinct and observable reason to be chosen.
- 02
The complexity costs retained are genuinely avoidable after withdrawal.
- 03
Migration, competitive loss and abandonment are estimated separately.
- 04
The target range keeps a minimum coverage of the priority segments.
Limits
What this analysis does not prove.
- Historical data sometimes underestimates the value of a reference that is scarcely available or poorly distributed.
- Removal can increase a distributor's power or dependence on a single plant.
- Migrations observed during a short pilot do not always capture loyalty and reference-price effects.
References
Works cited.
- Quelch, J. A. & Kenny, D. (1994), “Extend Profits, Not Product Lines”, Harvard Business Review.
- Kekre, S. & Srinivasan, K. (1990), “Broader Product Line: A Necessity to Achieve Success?”, Management Science.
- Lancaster, K. (1990), “The Economics of Product Variety”, Marketing Science.