Use Logic to Decide the What You’re Going to Offer Clients
Making decisions about which products or services to keep and which to let go can be hard. You’ve invested time, energy, and resources into building your portfolio, and so the idea of culling anything may feel like you’re losing business or even taking a step backward.
It’s natural to have an emotional attachment – your chimp brain (instinctive and emotional) wants to hold onto everything just in case, while your human brain (rational and strategic) knows that focusing on what truly works is the way forward.
The reality is that making strategic decisions about the products or services your business offers isn’t about giving up – it’s about working smarter.
There are a couple of frameworks that will help you with this, the first, the BCG Matrix offers a logical framework to help you evaluate where to invest your efforts, ensuring that your business thrives rather than just survives. By making decisions with your head rather than your heart, you can create a stronger, more sustainable business model that maximises both profitability and efficiency.
For large corporations, data-driven insights help determine market share and industry growth, but for small businesses, a more practical approach is needed. Looking at how many competitors you regularly come up against and using the Product Life Cycle model alongside common sense can provide a clear picture of which offerings are worth pursuing.
Understanding the BCG Matrix
The BCG Matrix divides products and services into four categories:
- Stars – High market growth, high market share
- Cash Cows – Low market growth, high market share
- Question Marks – High market growth, low market share
- Dogs – Low market growth, low market share
Each category represents a different stage in the product or service lifecycle and requires a different strategy.
Applying the BCG Matrix to Your Business
1. Identify Your Market Share and Growth Potential
For a small business, you don’t need access to complex industry reports to apply the BCG Matrix. Instead, ask yourself:
- How many direct competitors do I regularly encounter?
- Is demand for this product or service increasing, stable, or declining?
- Are new competitors entering the market, or is the market becoming saturated?
- What stage of the Product Life Cycle (introduction, growth, maturity, decline) is this offering in?
These insights will help you determine where each of your products or services fits within the BCG Matrix.
2. Prioritise Your Offerings Based on Their Category
- Stars: These are your most promising offerings. They have strong demand and generate revenue but also require investment to maintain growth. Focus on scaling these while keeping an eye on competitors.
- Cash Cows: These are established products or services with steady demand and limited competition. They generate reliable income and require minimal investment—use these profits to fund growth opportunities.
- Question Marks: These have growth potential but currently hold a small market share. You need to decide whether to invest further or cut your losses. If you can’t gain traction or the market is too competitive, it may be better to focus elsewhere.
- Dogs: These offerings have low growth and low market share. Unless they serve a strategic purpose or niche audience, they may be draining resources. It’s often best to phase them out.
Using the Product Life Cycle Model for Smarter Decisions
The Product Life Cycle helps refine your BCG Matrix analysis. Every product or service moves through these stages:
- Introduction: Demand is growing, but you may face high marketing and development costs.
- Growth: Sales increase, and profitability improves. Competition starts to emerge.
- Maturity: Market demand stabilises, and competitors fight for market share.
- Decline: Demand drops, often due to market saturation or newer alternatives.
By mapping your offerings onto both the BCG Matrix and the Product Life Cycle, you can make more informed decisions about where to focus your energy and resources.
Making Common-Sense Business Decisions
While the BCG Matrix and Product Life Cycle models provide useful frameworks, intuition and real-world experience are just as valuable. Consider:
- What products or services generate the most customer interest?
- Which offerings bring in the highest profit margins?
- Where is your time and money best spent?
- Are there emerging trends that might shift the market?
Conclusion: Focus on What Drives Growth
Using the BCG Matrix allows you to be more strategic about your business decisions. By identifying which products or services are Stars, Cash Cows, Question Marks, or Dogs, and cross-referencing this with the Product Life Cycle, you can decide where to invest, where to scale back, and where to innovate.
The key to business success isn’t offering everything – it’s offering the right things. Work smarter by focusing on the products and services that truly drive your business forward.If you’d like more information on how to use the BCG Matrix, you can bet it here, whilst you can find out more about the Product Life Cycle Model here.