Products Profiling
Friday, October 10, 2008 16:27
All kinds of products have their own product life cycle, and each stage in product’s life-cycle represents a different profile of risk and return. Generally speaking, a company should maintain a balanced portfolio of products. Having a balanced product portfolio includes both high-growth and low-growth products.
A high-growth product often refers a new product, such as iPod, that companies need to try to get to some market. It takes much effort and resources to market it, to build distribution channels, as well as to build sales infrastructure. However, it is a product that is expected to bring great profit in the future.
A low-growth product usually refers to an established product, such as regular Colgate toothpastes. They are more well-known by the market. Characteristics of the product do not change much and the customers know what they are buying. Meanwhile the prices do not change much either. Product of this kind has only limited budget for marketing. They are the milking cows that bring in the constant cash flow.
The question is, how to find out what phase the product is in, and how to classify what to sell? Furthermore, where does each of kind of the products fit into a business product mix? Should one product be promoted more than the other ones?
The BCG matrix help find solutions to these questions. The model reaches further behind product mix. Knowing what to sell helps the managers to make decisions about the priorities to assign to not only products but also company departments and business units.
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