One of the most important decisions you will make in your business is to decide which products you will hold on to and develop and which ones you will let go. You should hold on to products that generate more revenue and develop promising products. Furthermore, remove products that give you more cost than benefits. Through this process, you can maintain a profitable and competent business and ensure the product provided aligns with your business’s goals.
However, the question is, “How can I identify which to continue, develop, and remove?” Don’t worry; Ripple VAs introduce the Boston Consulting Group (BCG) growth-share matrix to you. This matrix planning tool will use graphical representations of a business’s products and services to help you decide what to keep, sell, or invest more.
The matrix will help you categorize your products into four (4) quadrants: dogs, cows, stars, and question marks. The quadrants are based on their position on the y-axis, representing the market growth rate, and the x-axis, representing market share. Later, you can base your decision on which category your product will belong.
When a product’s market growth rate and market share are low, it is called a dog or pet. It means that your product does not generate much cash because of its low market share and has little to no place for growth. You must look out for these kinds of products because these can become cash traps. Dogs (pets) should be your prime candidate for divestiture.
If you find your product as something that takes the most out of the market share but now has a low growth rate, your product must be the leading product in the market. If your product is a cash cow, you should milk the cow for as long as possible.
Star products have both high growth market shares and growth rates. These products generate high income but consume a large amount of your business’s cash and resources. If your product is a star, it is advisable to invest more in it. When a star product finally matures, it will become a cash cow (i.e., the leading product in the market); hence, you should focus on these products.
A product is a question mark if it has a high growth rate, but the business does not have a significant market share. Products like this are often called questionable opportunities because despite having a high growth rate, they cannot generate high income yet still consume a large amount of a business’s resources. If your product is a question mark, it is advisable to frequently and closely monitor it to see if it is worth maintaining.
A proper understanding of the standing of your product in the market is crucial to obtaining business success. A business’s resource is always limited; hence, as the owner or manager, you must know what to keep, what to end, and who to invest in. A strategic business is one step to success and one step ahead of competitors.