Introduction
In last months Groundswell we looked at the considerations a business must make in developing a marketing plan. Like all plans, Marketing Plans are subject to change and require regular review to remain effective. With the 4 P’s in mind (Price, Product, Promotion and Place), this article takes the marketing plan one further, by introducing you to two common analysis tools which can be used to evaluate your marketing strategy.
Ansoff’s Matrix
Igor Ansoff first introduced this matrix in the Harvard Business Review in 1957, and is used by marketers around the globe. The matrix focuses on the businesses existing and potential new products and customers, or the proposed market of the business. This is expressed by the following:
Market Penetration – By adopting this section of the matrix, the business is committing to selling its current products and services to the existing market, with the aim of increasing its overall market share. You may do this by rebranding, or marketing your product through conventional means. This is a low risk opportunity, and like most business decisions that are low risk, will provide the slowest return on investment. Once a point of market saturation is reached, the business needs to adopt another area of the matrix.
Market Development – Here the business looks to open its doors to a new market by identifying key product lines that may appeal to that particular demographic. Key opportunities here may be the ‘grow your own’ trend where there is scope to market to the junior generations who typically occupy far smaller market share in garden centres.
Product Development – This becomes more high risk, but certainly necessary in retail garden centres where new plant introductions are staple to generating turnover each season. It’s how you go about this that really makes the difference. People love new products, and product development and selling these to your existing customers is what will generate increased footfall and greater sales.
Diversification – Diversification holds the greatest risk, and involves the introduction of a new product geared towards an entirely new market. We have seen this take place in many garden centres over time with the introduction of gift shops, outdoor living and cafes. We have all read about nurseries that are currently taking this one step further with the introduction of farm shops, health and well being centres and garden design and maintenance services. Most of these examples are what we would call related diversification, i.e. they are related to your existing business. Unrelated expansion is far less common. While risk is high, diversification provides opportunities for greater returns and a broader business portfolio that may secure you against losses in other areas.
Boston Matrix
Have you ever heard someone say ‘what a dog of a plant!’? The meaning of this traces back to a very effective marketing strategy tool titled the Boston Matrix. The Boston Matrix was developed in the 1970s by Bruce Henderson of one of the largest business strategy consulting groups in the world – Boston Consulting Group (BCG). This matrix looks to identify opportunities for market growth given your existing market share.
Stars – high market share, high growth
These are product lines that return a lot to a businesses growth; however they also require large amounts of investment to compensate for this growth. Should the product maintain its large market share, it may eventually turn into a cash cow.
Cash Cows – high market share, low growth
These are product lines that maintain a high market share with low growth, requiring fewer resources to be input while continuing to return large margins. These are your ‘bread and butter’ lines and rarely will they drop out of the market, reducing them to dogs.
Dogs – low growth, low market share
Bringing me back to my original question about a dog plant – Dogs are products that have a low share of the market but require continual investment with minimal return. These are plant lines that you may hold in your product range as a means of providing the customer with a point of difference to your competitor, but they are not your money earners. Liquidation is the most common solution for your dogs.
Question Mark – high growth, low market share
A question mark is placed on those products that consume a lot of cash while providing a minimum return. You may invest in a question mark as many have potential to turn into stars once market share increases, and then become cash cows. However they often are not sustainable at this level, resulting in the product falling out of the market, reducing it to a dog. Should you wish to invest in a question mark, it’s pivotal in understanding the time which one should liquidate.
In thinking about this matrix, consider where plants such as the Golden Diosma, common red Geranium, Goji Berry, Flower Carpet series and even olives, particularly on a commercial level, might fit into the matrix.
Selecting and reviewing your product lines should be an ongoing process. All too often buying and stock control decisions are made on a whim. Careful line by line sales analysis will provide you with information to make informed decisions about your stock range. By maintaining a shared portfolio of stars, cash cows and question marks, while avoiding the dogs, you can increase your overall turnover and profitability.
Conclusion
There are lots of systems that address business performance, and getting professional advice is important when making significant business strategy decisions.
Growth of a business comes through careful planning and a proactive means of attack, once you have identified your customer’s needs. Using the above systems as a basis for building your clientele, you can then look at harvesting these people for repeat business through a Customer Relationship Management program. Read more on these, and how you might work them into your business strategy in a future issue of Groundswell.
References
McDonald (2007) Marketing Plans: How to Prepare Them, How to Use Them
Ansoff, H. I. `Strategies for diversification,' Harvard Business Review, 35 (5), 1957, pp. 113- 124.
Elliot, Rundle-Theile, Waller & Paladino (2008) Marketing: Concepts & Applications, 2nd Edition. John Wiley & Sons Australia.
