The Profitable Product That Should Be Killed

The best margin on paper, the worst product in practice.

01
Situation
A manufacturer's premium line shows the highest gross margin. It also causes most of the rework, delays and customer complaints.
02
Evidence
- High gross margin per unit
- Disproportionate share of production time and rework
- Long lead times on other lines
- Costs allocated evenly across products
03
The decision
Grow the premium line, reprice it, or stop making it?
04
Analysis
Gross margin hides the cost of complexity. With activity-based costing, the product's true contribution is far lower.
05
Framework
Contribution after complexity costs: allocate time, rework and handling to the products that cause them.
06
Resolution
The line is repriced and simplified; two variants are discontinued.
07
Founder exercise
Apply it to your own business:
- Rank your products by margin
- Estimate the time and rework each one consumes
- Re-rank by contribution

Situation