4 Strategies for Product and Service Management - The Rationalization Strategy

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The Rationalization Strategy
Rationalization is the third strategy for managing existing and mature products, and it should be applied to all product lines. Rationalization seeks to keep the product lines operating in a lean and efficient manner, while also ensuring that they properly align with the long term goals the company has set for them.
The rationalization process begins with an examination of a product or a product portfolio. The purpose is to identify where beneficial opportunities can be achieved and wasteful processes pruned.
Rationalization Approaches
There are three rationalization approaches: reduce product costs; discontinue the product; and increase product price to drive customers toward a new substitute product that the company has developed. Many companies would benefit greatly by removing products that fail to perform.
Reduce Product Costs
It might come as a surprise to learn that most companies with large product portfolios don't show a return on investment for all of these products. It's often the case that three or four core products perform well and support the other products in the portfolio.
Discontinue the Product
If a product is incurring losses or is nearing the final stage of its life cycle, a company could take the approach of either reducing the costs of the product, or discontinuing it.
Increase Product Price
Some companies are reluctant to embrace the discontinue the product approach. Operations managers don't want to get a reputation for quitting or giving up on products, so they persevere with poorly performing ones.
It’s best to embrace rationalization when it makes sense. But don't be too hasty or eager when it comes to discontinuing products.
Determining the Correct Rationalization Option
To determine which rationalization approach to use, an operations manager should review and consolidate the company's product portfolio. Your answer may have included some of the following steps that should be taken when assessing each item in the product portfolio:
list sales volume and sales revenue,
identify commonality among products,
determine variable costs, (...)

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