Stars, Dogs, Cows & Question Marks: Your Product Mix Strategy
Your company’s product mix is the list of everything that the company sells. We often look at the product mix from a contribution rate or percent of each type of product that a company offers. The product mix strategy is the method by which you make a decision about how much of which products to sell, and which ones you may want to get rid of.
Boston Consulting Group developed a matrix – known as the Growth Share Matrix – which is used to categorize a company’s portfolio of products (or business units) as a collection, and divide them based on performance.
Performance is denoted into four quadrants based on growth potential and market share. The categories are Stars, Question Marks, Cash Cows and Dogs.
Stars are the products you want to keep. These are the best products you’ve got; the ones you are likely to put the greatest share of your marketing budget behind, and the one that you will get the best return from as you continue to develop and refine the product according to customer demands. Not only is their current return excellent, they have continued high growth potential.
Cash Cows are offerings that you also want to keep. They have high market share, but low growth potential. These are the ones which will typically have a high profit margin and a rather predictable degree of stability. They are like comfort foods for your markets; even if there are other products out there, your offering is one they find appealing. You will continue to get money out of these products that you can use to invest into this offering and other areas of the business.
Dogs are your offerings that you should really consider getting rid of. With both low market share and low growth potential, you will likely find that investing dollars into other offerings will yield a greater return. Keep in mind that over time, many of your product offerings will eventually end up in this category, which is why it is essential to continue to innovate.
The last category – Question Marks – also known as “Problem Children” – are those that have low market share but high growth potential. It is likely a great product that no one knows about. This may be a result of under-capitalizing their product marketing or business development, difficulty in reaching their target markets, or they could be products that have a very specific use for a limited audience (or other factors).
Regardless of which quadrant your products lie in, it will be important to watch them because they can move into one of the other three quadrants, which will change your investment strategy. If you look at a typical product lifecycle, and apply this model to each of your products, you will have a better idea of how to treat each one and what to expect from their performance.
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