Product Performance KPI is one of the most used key performance indicators in companies across all industries. It ranks products based on their results in terms of sales volume and revenue generated.

Let’s learn more about this indicator and the importance of evaluating it.

What is product performance?

The Product Performance KPI ranks product sales based on revenue performance to inform your sales team which products are selling well. At the same time, you should rank the worst performing products to determine which products are not impacting your customers.

When monitoring this KPI, it is important to consider the specific contexts surrounding each product. For example, is a certain product getting a boost due to a viral marketing campaign? Or are you experiencing a decline because your competition offers a similar product at a lower price?

Product performance does not always directly correspond to revenue performance. For example, low-priced, high-volume products may represent more than 50% of your shipped products and be essential to your business model, but these products may not rank in the top 5 in terms of revenue. As with any KPI, you should use measures and metrics that are consistent with your business model and objectives.

Importance of evaluating product performance

The evaluation of product performance will guide the design of new products to repeat the same successes.

On the other hand, products that sell less may be discontinued or modified to better meet consumer demand. Again, it will be possible to avoid repeating the same mistakes when designing new products.

This KPI provides an overview of product performance. However, this action is always framed in a context that is important to take into account.

For example, sales of a product can increase thanks to a successful marketing campaign. On the other hand, they may slow down due to the arrival of a competitor in the market. These factors must be taken into account to truly understand the success or failure of a product.

What performance should be measured?

When we talk about product performance, it can encompass many indicators.

The most frequent indicators are:

  • Sales volume during a period,
  • The volume of business generated,
  • The margin generated,
  • The settlement rate.

Of course, all this must be considered in a context where the retailer can apply promotions or even additional discounts in store, which must be taken into account in the margin actually obtained.

It is also important to consider the impact of seasonality or the use of advertising brochures. All these criteria influence overall performance.

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