I have a background in marketing and strategy, so when I think about products, I also think about how to figure out which products are really making money for the business. This video is a very quick lesson about stars, cash cows, question marks and dogs – and why you should care.
Hint: if you’ve ever studied the Boston Consulting Group (BCG) growth-share matrix, you’ll know what I’m talking about so please share your comments about your cash cows and stars.
But if you think I’m speaking a different language, go ahead and watch the video. You might discover a new way to think about your products and potential market share.
Transcript
If you’re running a business and making a profit, fantastic, but that’s not enough. Why not? Because you’re probably not optimising your product portfolio to see what drives profit. In my experience, most businesses see revenue as a big bucket and as long as the outcome is profit, most don’t know which products are their stars, question marks, cash cows and dogs. Because your business is actually a portfolio of products and you should understand which of your product codes or activities is generating your real profit. And in my business past, I discovered a cash cow that we didn’t know about at first. In our case, photo books were a cash cow. We discovered the secret ingredient behind our profit was actually the sale of extra pages inside those books. The incremental activity that occurred to get a page in a book was effectively zero. The sheet of paper cost was minimal, but we’d sell the extra page at between $0.50 and $0.50 depending on book size. The critical insight we made was which book size and cover type drove the extra page purchasing behaviour and it wasn’t what we expected. Once we figured out the nuance, we optimised our business model to drive demand to the most profitable product combination. Everything else became a means to an end. Understanding our stars and cash cows is potentially transformational in how you execute your strategy to make money. If you have any questions about the use of these concepts, feel free to reach out.
