Purpose of Practice
To provide a clearly understood, profit-based method for discontinuing products and to provide a clear profit objective for newly listed products.
Description of Practice
Idaho sets specific gross profit targets for Regular and New products to attain during a rolling 12 month period. The gross profit target is set for each category and for each size within the category. The target is the average gross profit produced by like products in the lowest one fourth of the category (First Quarterly) for the rolling 12 month period. Higher targets may be set for new products in recognition of increased post-launch marketing efforts, newness or increased motivation. The latest New Product Gross Profit Target is the average of the gross profit produced by products in the lowest one-half of the category and size
Success or Improvements
A firm “goal” is set prior to a product’s presentation. If supplier’s feel that the marketability of the product is such that the target won’t be achieved, they may wish to present an alternative product. An established product which fails to achieve the target may be given an extension for additional marketing or promotional opportunities. Failure to achieve the target following the extension may result in closeout, reclassification to limited status or special order status. Gross Profit was used as the target since this is something within the supplier’s control. Costs can be reduced with retail price retained at the standard markup level to enhance Idaho’s gross profits. The achievement of the profit target isn’t solely dependent on increased unit sales.
Name: Bill Applegate, Product Manager
Agency: Idaho State Liquor Division
Address: 1349 East Beechcraft Court, Boise, ID 83716