Today’s post is an exercise. I’m not doing this for me and I don’t think learning is a passive pursuit, so today you’re going to need a pen or pencil and a piece of blank white paper. (I know! Old school, huh?) I got some questions on how to use the BCG Matrix that I included in my last post. That’s great! It isn’t just a picture. It’s a tool. It can be used in any business and using it can make the difference between whether or not a business succeeds over time. As a refresher, here is the Matrix again.
The BCG Matrix was developed many many years ago by the very smart folks at Boston Consulting Group, a premier strategic consulting firm used by large enterprises all over the world. Luckily, it also works for small businesses. I’ve used it since the day that Dr. Roy Adler taught it to me when I was a junior undergraduate advertising major at Pepperdine University. Unwittingly, it got me my first job running a company at the ripe old age of 26. I still use it today.
Remember, any new product is plotted into the top right hand, 'ideas' (?) corner. As that product starts to grow it will usually move into the ‘stars’ category where your clients’ favorite products are. As star products start to lose their sheen, they will fade into the cash cow category, these are products that people still buy, and may buy in volume, but they are not products that people get very excited about. Finally, as sales of cash cow products decline those products will slide into the dog category.
The thing I love about this model is its simplicity. Quite literally anyone can use it. You should(!) and to encourage that I’m going to give you a little home work. Go ahead. Take a break from the computer. Find a quiet corner and a blank piece of paper. (yes - paper - not an iPad or any other electronic device). Draw a square and then divide it into four equal parts (or ‘quadrants’ in model speak). Right a small question mark in the top right corner, a star in the top left, a dollar sign in the bottom left and a sad face in the bottom right. See? Wasn’t that tough? Anyone can do that!
Now. Think about your different products and services. (I would actually suggest that a photographer should do different versions of the model for products - prints, canvases, books, etc., and services, weddings, portraits (by type), commercial, etc.)
Stars and Cash Cows are usually the easiest to fill in. Remember, a Star Product is something you lead with or talk about when you are selling. It is something you know (or hope) clients will get excited about. Typically it is something that makes your business different from someone down the street. If it is a product that is growing (you’re selling more or making more this year than last year) put it in the top of the box. If it is a product that is waning (like the setting moon) put it in the bottom of the box.
Cash Cows on the other hand are products you usually don’t talk about except to mention. They are products that your clients will negotiate price on (knowing they can also buy them down the street). They may be products that are a pain for you to maintain and fulfill. However as their name implies, a cash cow will also generate cash. From a business strategy perspective, their purpose is to be ‘milked.‘ They may be a pain, but your business benefits from their existence.
Ideas are products you have thought of, but that you may have just launched or are thinking about launching. Their soul defining characteristic is that they generate no cash.
Dogs are products you may still have in your catalog, but which generate no cash. The idea of a dog is that you want it to go away. (Not like your fuzzy little happy dog at home!)
A healthy business will have products (and if applicable services) in all four quadrants. Take some time now and map your products into these quadrants. Are their cash cows you want to get rid of? Are you sure? Are they generating money? The strategy with a cash cow is to make them yield as much money as possible with as little work as possible. How can you make them take less work but still yield a healthy contribution to your bottom line? (Also remember that less work isn’t no work. Sometimes the right thing to do is bolster a cash cow with a little thought and energy so it can go back to generating cash for you). Dogs are products that you simply need to bite the bullet and remove from your catalog. Even though you don’t sell them much, they take time, any small business’s most valuable commodity. Do you have at least three or four entries in your 'ideas' category? If not that's a big problem and something you want to work on fixing...
And speaking of time, here’s another way to look at the model. You should be spending the vast majority of your time on the products and services in the top two quadrants. You want to give good ideas a real chance to succeed (and you want to be coming up with new ones). And, you want to continually bolster your star products.
It is an interesting fact that one person’s star may be another person’s cash cow or dog. The difference will sometimes be in the way a product is marketed. We’ll talk about this concept tomorrow - but it’s an interesting thing for you to think about. Are there products in your cash cow or dog categories that you KNOW are other business’s stars? What is the difference between you cash cow and their star? Differentiation. We’re going to talk about that tomorrow.
Feel free to drop me a line here in comments or via email at my first name at pictage.com. Your questions fuel these posts.
Now - model away! (And if you’re courageous enough, send me a picture of your model!)