Yes, this is a Marketing theory blog, not one on pet care. So what do dogs have to do with Marketing and how does it concern small businesses?
The term dog comes from a study by the Boston Consulting Group which should be extremely familiar to any business student or student of marketing. The study produced a matrix, often referred to as the Boston Box which classified a product;s position in the market based on the market’s growth rate and the product’s relative market share.
Relative market share is defined as the share of the market held by a particular product when compared to the market share held by the market leading product.
The Boston Box describes four types of product:
- Where the product has a high market growth rate and a high relative market share it is described as a Star. Star products are market leaders but they may not be that profitable. A company may have to invest heavily in promotional activity and other marketing mix elements to maintain the products star status and to defend the product from attacks by competitors.
- Where the product has a high market growth rate but low relative market share, it is referred to as a Question Mark, or in some instances a Problem Child. many new or innovative products may be described as Question Marks. The future of these products may depend on whether or not the brand owner wants to invest further in them. These are products balancing on a ledge. Further investment may turn them into stars or a company may decide to cut their losses and divest.
- Where there is a low market growth rate but high relative market share, products may be defined as Cash Cows. These are often products in a mature market. These are often highly profitable products and money earned from the sale of cash cows can be invested to maintain a Star products market position or to develop a Question Mark product into a Star or cash cow position.
- Finally, there are Dogs. These are products where the market growth rate is slow and there is a low relative market share. These products may no longer be worth supporting. In fact, many business advisors would tell a business to “divest their dogs”. In effect, get rid of a dog product by selling to another business or to simply stop making it. Dog products often exist in declining markets.
There has been criticism of the Boston Box and it has been described as a very crude method of categorising a products market position. In particular there has been criticism that the ‘divest in dogs’ approach may falsely represent the position that many products produced by smaller firms hold.
Firstly, there are some dog products which need to be produced, for example as a necessary spare part or accessory for a star or cash cow product. This position may be exactly where a small manufacturer sits.
Secondly, a small manufacturer may simply not have the resources to support a star product. For example take a small jam producer. They have a mature market dominated by household brands like Hartley’s or Robertson’s. The market growth rate is slow and the small business is never going to have a high relative market share. If the Boston Box is to be the deciding factor for the small jam producer, the decision is easy, divest, kill the product and possibly your business. That seems to be a pretty drastic action.
So what do you do if your main product is a dog?
Well, you could redefine your market. Rather than looking at major food producers as your competition, look at others like yourself. In effect niche market. However in niche markets, there may only be room for a small number of companies. If you are going to niche market, you have to develop a clear identity for your products and often have to carve out a unique position.
For example, a business I dealt with for many years was a manufacturer of twin tub washing machines. My mother used to have a twin tub washing machine (in the early 1970’s) and she hated it. Basically the machine had one tub of hot water for washing the clothes and a second tub of water for rinsing them. When the wash cycle was over, you had to transfer the sopping wet clothes from one tub to the other. In even older machines, like the one my grandmother owned, a mangle was attached to the rinse tub to squeeze excess water from the clothes; and if your were not careful, to crush your fingers!
So, in the age of all in one washer driers, what market is there for old-fashioned twin tubs?
Well, the company I used to advise found two niches where there was scope for twin tub washing machines. The first was the caravan and motor home market. The business developed a twin tub washing machine that worked off a 12 volt electrical supply. This meant the machines didn’t need to be plugged into the mains. The machines could be filled using buckets of water, so there was no need for plumbing. It could therefore be used on campsites where there was no access to mains water or electricity.
These aspects of the product led to a second market niche for the machines, Africa. Many places in Africa have no mains water and often intermittent electricity supplies. The twin tub machines would work on water collected from a well and could run off a generator or a car battery. In the UK this product was a dog but in Africa, it was a star.
Another potential strategy for dog products is to harvest them for cash. In this strategy you must pare down costs to an absolute minimum whilst maintaining your unit price. The aim is to maximise the unit profit of each item sold. This leads to the strategy of developing a ‘cash dog’. The product spare part market may be such a position where the price of a spare part or accessory is maximised whilst costs are reduced.
Earlier in this article, I referred to the small jam maker. This is a type of business which I have advised on many occasions. Every farmer’s wife and WI member I ever dealt with seemed to want to develop their jam making expertise into a viable business. The problem is that they all aimed themselves at the same market niche. They all saw themselves in the high price, organic, ‘foody’ farmer’s market niche and there simply wasn’t room for all of them to develop a sufficient presence in the niche to ensure a long-term business. My advice to many of them was to seek out another niche, for example supplying local caterers or hotels rather than marketing to consumers. I also felt that many of them would be better placed joining forces, possibly as a cooperative, which may give them a scale of production which would allow them to compete with larger producers.
So, if your product meets the Boston Box definition of a Dog, don’t despair, your product may not need to be put to sleep. with a little thought it may continue to be viable.