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How to use the BCG Matrix Model to Review your Product Portfolio
This tool explains how to use the BCG Matrix, along with how it can be applied.
Introduction
What is the BCG Matrix?
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It's also known as the Growth/Share Matrix.
The Matrix is divided into 4 quadrants derived on market growth and relative market share:
1. Dogs: These are products with low growth or market share.
2. Question marks or Problem Child: Products in high growth markets with low market share.
3. Stars: Products in high growth markets with high market share.
4. Cash cows: Products in low growth markets with high market share
- Step n°1 |
How to use the BCG Matrix?
To look at each of these quadrants, here are some tips:
>Dogs: The usual marketing advice is to remove any dogs from your product portfolio as they are a drain on resources.
However, some can generate ongoing revenue with little cost.
For example, in the automotive sector, when a car line ends, there is still a need for spare parts. As SAAB ceased trading and producing new cars, a whole business has emerged providing SAAB parts.
>Question marks: Named this, as it’s not known if they will become a star or drop into the dog quadrant. These products often require significant investment to push them into the star quadrant. The challenge is that a lot of investment may be required to get a return. For example, Rovio, creators of the very successful Angry Birds game has developed many other games you may not have heard of. Computer games companies often develop hundreds of games before gaining one successful game. It’s not always easy to spot the future star and this can result in potentially wasted funds.
>Stars: Can be the market leader though require ongoing investment to sustain. They generate more ROI than other product categories.
>Cash cows: ‘Milk these products as much as possible without killing the cow!. Often mature, well established products.The company Procter & Gamble which manufactures Pampers nappies to Lynx deodorants has often been described as a ‘cash cow company’.lightbulb_outline Use the model as an overview of your products, rather than detailed analysis. If market share is small, use the 'relevant market share' axis is based on your competitors rather than entire market.
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