Know When to Cut Your Losses
I have been developing and marketing a product for 2 years hoping that it will sell well. Through marketing and stubbornness, I made a few good sales but not enough to be sustainable.
Reflecting back, it was never a good idea. I was too blind and only see what I want to see. The market for the product is stagnant, it is barely growing 5% a year. Little and no new users come into the market. The market is already dominated by about 7 competitors and market is caught in a price war. In a nutshell, there are not enough new users for me to service and not enough differentiation for existing users to switch to my product. I could have develop further differentiation, but the size of the market does not justify the cost.
In addition to the time spent, I also reflect the opportunity cost that I have incurred. Instead of diverting my attention to two or more products, I should have focus on my best sellers were there is already a market, and it is still growing. The cost of growing sale is far cheaper compare to developing an entirely new product for a market that is stagnant.
I gave myself 2 years to try the new product and it has failed to reach my expectation. Thus, I have no choice but to cut my losses. It is not an easy decision but the evidence is overwhelming.
The criteria are as follows:
- How much is the sale compare to other established product? 2, What is the cost of development and marketing compare to the sales that came in?
- What is my opportunity cost if I focus on my core product?
- What is the growth of the market size? Are there new users coming into the market? (This was later added when I reviewed my numbers)
From criteria above, I know my product will not sell well. Ultimately, the cost of marketing has eat into my profits and market is not growing as I expected.
Decision should be based on cold hard facts, and a range of criteria for you to assess. Once a decision is made, do not hesitate and take action to implement it.