More often than not dogs are products that have been replaced by new innovation. Innovation is indispensable in maintaining a successful business…if you do not change as the times, the markets, and products require, you are dead. Therefore, if a company wishes to survive it must continuously develop new products in order to keep up with, and ahead of, the competition. However it only has limited resources. Therefore the old, unprofitable products with no future must be eliminated in order to shift resources into the new innovations. Hence dogs always die.
This practice is particularly dominant in the technological industries. Computers are a good example of this. They are continually being upgraded to more powerful, faster versions, leaving the less powerful, slower versions to become obsolete. A Japanese firm applied the Boston matrix to their Business Applications & ERP Systems products. They discovered that their dogs didn’t offer all the features consumers required, so were suffering from reduced demand. Thus causing higher unit costs per product due to reduced economies of scale. They were also operating within unreliable, rapidly declining markets.
The Dreamcast, Sega and Mega drive are also examples of dogs that have declined and died. Competitors introduced alternative consoles such as the X Box and the Gamecube, which offered the consumer better graphics and faster loading times. In turn, the consumer grew to expect such features as standard. This resulted in reduced demand for, and the eventual death of, the Dreamcast and N64.
Unsuccessful Problem Child
Not all Problem Children are successful. Robert Cooper discovered that “…of the tens of thousands of new consumer food, beverage, beauty & healthcare products launched every year, only 40% will be around 5 years later.”
If a new product is developed and not marketed properly, or is merely so advanced in the eyes of the consumer that they do not believe it will work, that product will fail to make an impact in the market place. It will start off on the Boston Matrix as a Problem Child, with low market share in a growing market, then instead of developing into a Star, recede into being a Dog.
May Generate Some Modest Cashflow but only in the ST
As Gauses Principle states: “The world is a finite environment so that new species can only come into existence if they can displace existing species…one will survive, one will decline – the new is substituted for the old.”
A dog can be kept as part of the product portfolio in the short term as this transition is not instant. There are always a few laggards who are reluctant to change, and therefore continue to purchase the old product. However this will not last for long as business consumers who do not upgrade will become economically uncompetitive and lose market share. Before long individual consumers will feel left behind, either technologically or socially, and will soon see the benefits offered by the new innovation. The dog product’s profitability will keep declining as reduced demand leads to reduced economies of scale and increased per unit cost. A price increase to cover these augmented costs is out of the question, as the product is already struggling to maintain its market position. Therefore the dog will, in the long term at least, need eliminating.
Good examples are the mangle and washboard. They were superseded by the washing machine, which was a radical new innovation designed to satisfy the same consumer need. People initially were reluctant to purchase as there was little consumer confidence, and they were expensive to buy. Therefore consumers continued purchasing mangles and washboards for a short period, whilst the company educated people as to the benefits of the new machine. Consumer confidence in the product grew, as is obvious by the fact that today, all households own a washing machine and washboards and mangles are extinct.
In a business context, the typewriter is a good example as it has now been completely replaced by the word processor. When word processors were first introduced they were expensive and considered a high-risk purchase. Hence firms were reluctant to buy and continued purchasing typewriters instead. However these firms soon discovered that they were losing their competitive advantage. Consumers were losing confidence in their company, as their documents took time to produce and did not look as professional as those of competitors.
“Given the finite financial resources of the company, those devoted to the weak product are less profitably invested than they might be if they were available to produce, promote & distribute either a new product or other existing products. The opportunity cost is potentially huge.” A company would obtain a far better return on investment if they invested in their up and coming problem children, at the beginning of their lifecycles, as opposed to throwing good money after bad on their dog products which are coming to the end of their lives. If dogs are kept too long their contribution to cash-flow will eventually become negative.
However it is not only finances that will be wasted, marketing and management resources will also be wasted keeping dogs alive. “Product overpopulation spreads a company’s marketing resources too thinly.”
If a company eliminated their dogs, it would free up marketing resources that would be better invested in ensuring the success of their problem children.
Cash Cows Past their Best, having Lost Market Share to Competitors
Not only has the market growth slowed down or become static, due to many shifting to new technology, their relative market share has also decreased due to the entrance of competition offering better perceived value. If a company operating within a saturated market continues to use old production processes instead of updating to new, more efficient methods, their products will become dogs. The competition will benefit from economies of scale and reduced costs, which they can pass on to consumers. Cost leadership purchasing will occur and they will soon discover they’re losing market share to competitors with ‘me-too-er’ products. Their products will become unprofitable dogs and eventually costs will get so high production will be halted in order to minimise losses.
This occurred with lino flooring. New production techniques meant vinyl flooring could be produced much cheaper, yet with a similar finish to lino. It was also much easier for consumers to maintain. Consumers saw better-perceived value from vinyl, so switched consumption. Thus pushing traditional lino out of the flooring market completely.
Meccanno are another example of an original invention being pushed out of the market. They were the original innovator of building sets for children and in the ‘baby-boom’ generation most children owned one. However nowadays parents buy their children me-too-er products such as Lego and K’nex, as they feel they offer better-perceived value. Such products were cleverly marketed to encourage sales, whilst Meccano was left to die.
Market in which they operate becomes saturated or is eliminated entirely
Market growth slows down or begins to decrease as a result of reduced demand for the products within that market. Often this is due to a product being replaced by a better alternative or new innovation. Sometimes however, the market is restricted due to increased consumer awareness or government legislation. A product could have an enormous market share within a growing market until it is discovered to be unsafe. Thus the market suddenly dies and market share is lost. Alternatively, a changing social environment could cause a slower, yet equally damaging, saturation of the market.
The IBM computer is a good example of a product that was replaced by new, or better innovation. They were once recognised as the leader in the field of computer technology. However they failed to recognise the need to develop a computer for use in the home, and were consequently eliminated by their competitors.
The obvious example of consumer awareness and government intervention is asbestos. Asbestos was one of the most commonly used methods of fire-proofing within the building industry prior to the discovery that it causes asbestosis, a disease that eats away at people’s lungs. Hence sales of the material immediately dropped, resulting in the product becoming a dog. The introduction of government legislation banning the use of the substance altogether, shortened the products decline stage and led to its immediate death.
The Product lifecycle is a dependant variable which is determined by market actions, it is not an independent variable to which companies should adapt their marketing program. Marketing management can alter the shape and duration of a brand’s lifecycle.” The shape of a product’s lifecycle is not set in stone, the growth stage can be revisited if a firm can continually modify their dog product’s position to meet changing consumer needs, giving it a scalloped lifecycle. “In practice, most ‘new’ products are modified existing ones.” This may occur through feature modification, style modification, quality modification or image modification. Identified two broad categories of how this could be achieved: “product enhancement or product repositioning.”
Product Enhancement/Real Repositioning:
This includes feature modification, style modification and quality modification. Firms continually add additional features to their existing dog products claiming improved quality, style or practicality. They may market these products to consumers as ‘new’ versions, when really they are merely a modified extension of the old one.
A great example of a company who have done this is Nokia. They are continually developing their old mobile phone handsets to include additional features. This allows them to extend the lifecycles of their existing products and to boost sales and market share within the saturated mobile phone market in which they operate. Take the recently launched Nokia 6385 model. It offers all the features of the 6340, and looks virtually identical, but offers the additional functions of PC synchronization and has an enhanced phone book and calendar. By renaming the model consumers perceive the phone as a new version, thus boosting sales and extending the 6340’s maturity stage. Such product proliferation is relatively easy for a company such as Nokia, as they already have powerful brand awareness within the industry.
Psychological Repositioning
Alternatively, a firm could revive a dog product by repositioning it within the eyes of the consumer as it already exists. They can either reposition the product within another market, or revitalise its position within the current market by altering the promotional mix and extending the product line.
Skoda repositioned their products, all of which were dogs, by launching a new range of trendy, modern cars. This was teamed with a massive advertising campaign that played off their old, boring, traditional image. Hence altering the consumers’ perceived image of the brand as a whole.
Lucozade and vinyl records are good examples of products being repositioned within different markets. Lucozade was originally targeted as a drink to aid the recovery and rebuild the strength of sick people. However the market had become saturated and their market share reduced as people lost faith in the company’s tenuous medical claims. Instead of eliminating or enhancing the product, the company merely repositioned Lucozade within the growing energy drink market. Lucozade, originally a dog, is now a profitable cash cow with a high market share of the energy drink market.
Market Share and Cash Flow/Cost Savings Mismatch – Niches
The Matrix only takes into account two dimensions. Products defined by these 2 dimensions may be dogs, but could, by other dimensions, such as quality and differentiation, be seen as necessary to the company’s survival. “Product differentiation for a particular market segment may have low market share but produce high success within a market segment. The Boston Matrix also assumes that low market growth and low market share result in high costs of production due to few economies of scale. Thus resulting in low, if not negative, cash flow. This however is not always the case, as most of those products aimed at niche markets would, by definition of the BCG matrix, be defined as a “dog”.
Many such products operating within niches are highly profitable. Take, for example, tailor made clothing and fitted furniture. They offer a customised service so do not benefit from economies of scale, and have a low market share in a low growth market. Vivienne Westwood offers custom-made couture clothing of a ‘one off’ nature. The products are designed only for the customer and are originals. The couture clothing industry is a low growth market, of which Vivienne Westwood has a low market share. However because her products are highly differentiated and sell at a high price, the profits are high.
Product line scope
In many markets a company is expected to offer a full product mix, with adequate width, length and depth. For example, Hotpoint would be expected to produce a range of washing machines of varying technical specifications and over an adequate price range. The larger a brands range, the more reliable and professional consumers perceive the brand to be. Also, people rarely purchase the lowest or highest product in the range, they purchase the next one up or down. Therefore, a company may choose to maintain their dog products in order to protect the other products offered within the range
.
Conclusion
Altering the products lifecycle to extend the maturity stage, or giving it a scalloped lifecycle may prolong the product’s life for a while, but how long will it last? Repositioning it, either using real repositioning or psychological repositioning, may remove the product from the ‘dog’ quadrant for a while, but eventually it is likely to find it’s way back there.
Technology evolves over time as companies continually try to gain competitive advantage. As this change occurs, consumers’ expectations evolve with it. If dog products do not, or cannot, grow with these changes, they will die out. It is a company’s mission to meet the needs of the consumer, and innovation is necessary in order to do so. However companies have limited resources available to them, so need to ensure they are invested profitably, not wasted on their dog products. This often results in dogs being eliminated.
Appendices
Appendix 1 - Linking the BCG Matrix to the Product Lifecycle
Appendix 2 – Example of the BCG Matrix in Use for Business Applications & ERP Systems
Appendix 3 – Further Analysis of the BCG Matrix in Use for Business Applications & ERP Systems
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