The KPI Product Performance, is one of the most widely used key performance indicators in companies across all sectors. It enables the ranking of products based on their performance in terms of sales volume and revenues generated.
This allows teams to learn about the most lucrative products for the company, and to adapt accordingly. By evaluating the previous year's product performance, it will be possible to guide the design of new products in order to replicate the same successes.
Conversely, products that sell the least can be discontinued or modified to better meet consumer demand. Again, the same mistakes can be avoided in the design of new products.
For example, the sales of a product can increase thanks to a successful marketing campaign. Conversely, they may slow down due to the arrival of a competitor on the market. These factors must be considered in order to truly understand the success or failure of a product.
When analyzing this indicator, it is also essential to distinguish between performance in terms of sales volume and revenues. A cheaper product will often sell in larger quantities, but its impact on the company's revenues will be more limited than that of a high-end product.
Generally speaking, the performance of a product depends on several sub-indicators: the sales volume over a period, the revenues generated, but also the margin generated, the margin rate and the sales rate.
The calculation of the margin generated must also take into account any promotions and discounts that often have a positive impact on sales volume. Seasonality and advertising operations also have a significant impact.
Like all key performance indicators, this one offers the opportunity to evaluate the company's progress towards its objectives. In this case, it will be a question of verifying whether the product has lived up to expectations and whether the forecasts in terms of sales volume or revenue generated have been achieved. To take full advantage of this KPI, it is therefore essential to develop these forecasts upstream.