My last post was a difficult one to write. It is not fun to share bad news. Yet, to omit it from what I am writing might create a false impression of what is going on in the world of craft today. It is not pretty. Very talented people are struggling, or at least feeling the pinch.
But it is not all bleak either.
One of the things I have learned in this business is the importance of having a balance. What kind of balance? A balance of price points, a balance of outlets for my work, and a balanced mix of products. Products tend to vary in how profitable they are, and their stage in development. Boston Consulting Group developed a matrix, many years ago, that placed products in various quadrants based on the product's growth or market share, and profitability, as a way to assess a company's portfolio of products.
A fast growing product, or one that has a good market share, and is very profitable is a Star. As much as companies want to have all stars in their portfolio of products, it is not likely. Stars may start out as Question Marks. Products that may have a good growth, but are not yet very profitable. At this stage, it is unclear if they will become Stars, or Dogs. Dogs are products that have a low market share or growth, and are unprofitable. Dogs need to either be rehabilitated, or dropped from the mix. Finally, there are Cash Cows. These are products that may not have the growth they once enjoyed but they are profitable. They generate cash to help fund the future Star products of the business. They do not need much investment beyond production, and occasional tweaking of design to generate cash for the business.
Thinking about where your products lie on this spectrum is a good way to start to think about what changes you might want to make in your product portfolio. Are there products that need to be shed? Are there products that need some more nurturing to be made more profitable? What are your Cash Cows and your Stars? What threats might exist to these products in the market? These threats can come from competition, new technology that can make a product obsolete, or from changes in the economy.
You may think new technology could not effect our businesses as artists/craftspeople. Well, what if you make cell phone or iPod cases or covers? Talk about a moving target! Yet, there has been good demand for these types of products. Being in a market such as this can be a wild ride, but a highly profitable one if you are quick to respond to the changes, and have a means to get your product to market very quickly.
A balance of price points is important as well. Low priced impulse items are important when the economy is soft. They could be great gift items, or personal indulgences. When the economy pulls back, these types of products can maintain their strength. A mid-point product is probably the backbone of most businesses. Although, I believe the midpoint is struggling the most right now in the craft market. Just as the middle class is being squeezed, the mid range of price points are selling more slowly. Some, such as Bruce Baker, have talked about the strength of the very high end of the market, as we have had an increased concentration in wealth at the upper levels. Do you have a product to offer this group?
Your focus might be on one price range, or on your Cash Cow. But having a diversified portfolio of products will give you more flexibility to withstand the economic strains of a tight market. It will allow you to adapt to serve the strongest part of the market. If you are selling all high end work, and the economy tanks, your business may have the legs cut out from under it. Strictly selling low priced impulse items might mean you are forever chasing the next trend, and looking over your shoulder to see who is trying to copy your success.
Finally, it is important to keep your eyes looking beyond the moment. What is your long range goal? Where are you heading? Are you still on the right path, in spite of some bumps in the road? If not, what adjustments do you need to make to get yourself back on track?
A bad show is just that. A bad show. Nothing more. Nothing less. Even in the worst of shows, something is learned, and connections are made. Having a broad base in your business means you are stronger to survive the economic swings. As much as I was disappointed in my sales at the show this past weekend, it is not a crisis. I have wholesale orders to fill, and interest from a catalog in carrying the cranes. In spite of the slow retail business, I have still grown my business over last year's sales. I am in this for the long term.
An investment advisor would tell you not to invest all in one stock or company. You should diversify your portfolio of investments. Your investment in your business should also be diversified. A range of products. A range of markets for your products. When the going gets tough, and it is looking tough these days, it is easier to withstand the shocks if you have a broader base.
Happy Halloween, and it is back to making cranes, for me!