Today I want to dig up and add a little bit more to an old video I did on the BCG Matrix. Before continuing, if you don’t know what the BCG Matrix is, please take a look at the old school BCG Matrix video I did a few years ago (just ignore the ridiculous hair):
Okay, now that you understand what the BCG Matrix is and how it helps you classify your various product lines, I want to talk specifically about the dogs in your matrix and what to do with them. As I noted in the video, the dogs are those product lines in a market that is not growing and in which you have only a small market share. Typically, this will mean that you should dump these product lines to free up resources for other, higher potential, products. However, there are exceptions to this rule.
Now remember, something in the dog category isn’t necessarily something that is unprofitable. Additionally, sometimes dogs are starter products that help lead customers towards the purchase of higher performing products. If you’re making money from the dog itself and it helps you sell other products, you definitely want to keep it around.
Even if the dog itself isn’t profitable, if it helps you sell products that are profitable, you may not want to dump it right away. If that’s the case, however, I recommend that you begin to look at the product line as marketing, not as its own product line, as you do strategic management. So, for example, if you’re a graphic designer who specializes in full service branding, you might actually lose money putting together event flyers for people. However, if you often have clients start with an event flyer and then move up to purchasing higher-level services like website design, you want to do some analysis before dumping flyer design altogether, but that analysis should be around flyers as a marketing investment, not as a product. That means that you’re not assessing profitability of the flyer itself, you’re assessing the return on investment for the time and money put into flyer design based on the percentage of flyer clients that turn into higher end clients and the average amount that each one spends with you. This analysis will give you a better picture of what flyers contribute to your company and whether or not you should keep offering the service.
As you can see, not all dogs are created equal so be sure to do a little analysis before you get overly excited by a BCG Matrix analysis and start cutting complete product lines without fully analyzing their real contribution to your bottom line.
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