Managing Your Product Range - Part 2

In part 1 we looked at developing your product range using the pragmatic and simplistic method; 

1.     Every new beer must have a purpose

2.     Try to create a hero product (interesting in the recent Innis & Gunn proposal to raise finance , they state 80% of their sales (£12.5M) are only 3 beers!

3.     Always price up

4.     Always know your costs

In this article we look at an alternative way to look at a product range.

There is a school of thought that in addition to the simplistic and pragmatic approach we can look at the lifecycle of the products.

In today’s dynamic marketing environment your product range cannot remain static.   Products go through various stages. The effects of social media, technology, intense competition and changes in customer needs and wants means that it is vital for a business to continually analyse their products and ensure they know where their products are heading.

The Life cycle view of product development

Product range can be looked at via a matrix that looks at amount of effort in resources and money that are required to sell a product and the revenue obtained from the product

The objective is to drive products as fast as possible from “Problem Child” into “Rising Star” and then hold them as long as possible as a “Cash Cow” where they make the most money

Problem child

·      Generally where a product starts life, new beer?

·      Needs support, managing the launch, keeping pressure to get some initial sales.

·      Costs money, takes resource, takes time

·      If it fails, it just drops out of the range altogether – try another one!

Rising star

·      Product passed through early stages, looking good!

·      Requires real push, real effort to make it succeed, large investment in resource

·      Sales taking place and the objective is to push them to become a Cash Cow.

·      Insufficient energy/push applied to it, means it either goes back to Problem Child or slides straight to Dog!

·      Starting to cover its costs.

Cash Cow

·      Ideal position for products.

·      Revenue flowing, effort required to achieve sales reducing as product known in market place, key product that Sales lead with – THE ORDER STARTER!

·      Time to make the most money, promotional activity relevant

·      Greater market segmentation, create different versions of the same product for specific market niches? Same product perhaps marginal tweaks in the Hops used to create different versions & keep interest going.

·      Generates the main profit for the company, could become the Hero product.

Dog

·      End of product’s life, well known but not so easy to sell!

·      Margins reducing, as cannot always get the best price.

·      Need clear decision as to whether to keep in range

·      Can still make money but must have minimal effort applied. Easy to produce?

·      If not managed correctly has a net negative influence.

·      Keep it there if it makes money, but be prepared to drop it.

Dogs can get a new lease of life and be re-energised into Cash Cows but be careful of the investment.

A company needs a good mix of new products coming through to ensure it has a long term future.  However too many products in the Rising Star block results in a real profitability issue for the company, coupled with issues on resource.

Equally too many “Problem Childs” soaks up resource.

A reasonable number of products MUST be capable of being driven into the “Cash Cow” segment and being able to reside in that section to generate profits.

The ideal is to adopt both ways of looking at your products. Use the simplistic, pragmatic approach but overlay the Life cycle of the product to understand your range better.

Product management is a complex subject but essential in order to maximise revenue and profitability for a company. If you would like to learn more or discuss your own product range please contact david.martin@businessofdrinks.co.uk