Product portfolio analysis is a crucial tool for any business with a stack of products or services on the market. The approach can differ but at the end of the day, the desired result is a valuable assessment of business units. Boston Matrix, also known as growth-share matrix is one of the proven methods and at A4E we`ve built a tool to simplify the task by evaluating a product contribution to the overall profit and its popularity among the customer base.
Here comes the question – what to do when our report is done? Are there recipes for successful business decision when the data is sorted and properly displayed? What are the insights we can extract out of the products categorized as Stars, Dogs, Cows, and Puzzles? How to turn a Puzzle into Star or a Dog into a Cash Cow?
The products in this group create a dilemma. They are not quite popular, although they bring significant profits. The goal should be to boost their popularity one or another way to move the units into stars category. How can you do this? If we can scrape a bit of their profitability and get healthy sales boost, there is a business case in this.
- Promotional activities are aimed at such goal and they should be carefully examined and therefore applied. No matter if it will be a discount, special proposal, and seasonal extra or else, promotion is the first step to be made.
- Product bundles are a potentially viable option. Just link some of the stars with some of the dogs and offer them as a bundle. Depending on the market and the type of business, this might be more than beneficial.
Lack of popularity and neglectful profit turns a product into a dog. It is not a destiny to die for but it happens. What to do with such products?
- Evaluate the reasons causing the position of a Dog product. Is its life cycle or lack of features/benefits or late entry in a saturated market or local preferences or it is all about the price?
- Eliminate this product from the product portfolio. It might be replaced with something or not but sometimes we take wrong decisions and such action is like a business confession. Do not hesitate to do it.
Great sales performance in terms of units and profit margin below average turn product into Cow. Such products are capable of generating sweet revenue but they lag behind in terms of profitability. What to do with such product?
- Consider price increase by examining the competition. Way more sophisticated approach would be the usage of price optimization. It brings genuine data analytics into decision making by utilizing mathematical models capable of determining how customers will respond to different prices for its products and services.
- This one is an oldie but goldie and is centered around cost reduction. The profit margin is the difference between supply and sales price. If a business is capable of reducing the costs it will face better financial performance.
Products facing great demand while staying more profitable than average of the product portfolio performance are nothing less than stars. We`d love to fill our business sky with more of them. How to do it?
- Evaluate the factors turning any of the business units into stars. Is it the market, or price or the location or else. Find it and apply wherever it is applicable.
- Examine potential new star products and replace them with discounted dogs.
These 8 tips & hints on product portfolio analysis based on the foundations of the Boston matrix might be a lot more. Before reaching such stage, you need to reach the point where the matrix is applied to your product data.
Try out our Product Portfolio Optimization tool that is doing the job fast and easy.