How to use the BCG Matrix

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 By Annmarie Hanlon 16 Jul, 2019

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Examples of using the BCG Matrix (Growth Market Share

Matrix) to review your product portfolio
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 based on an analysis of market growth

and relative market share, as shown in the diagram below.
 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

Members can use our guide exploring classical marketing models to learn
more about how to apply them to real-world challenges. We also have a free
guide for more recent digital marketing models including our Smart Insights
RACE digital marketing planning framework.
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How to use the BCG Matrix?

To apply the BCG Matrix you can think of it as showing a portfolio of products
or services, so it tends to be more relevant to larger businesses with multiple
services and markets. However, marketers in smaller businesses can use
similar portfolio thinking to their products or services to boost leads and sales
as we'll show at the end of this article.

Considering each of these quadrants, here are some recommendations on

actions for each:

 Dog products: The usual marketing advice here is to aim to remove

any dogs from your product portfolio as they are a drain on resources.

However, this can be an over-simplification since it's possible to 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 emerged providing SAAB parts.

 Question mark products: As the name suggests, 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.

 Star products: Can be the market leader though require ongoing

investment to sustain. They generate more ROI than other product
categories.

 Cash cow products: The simple rule here is to ‘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’.

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.
BCG Matrix Example: How it can be applied to digital
marketing strategies?
The BCG Model is based on products rather than services, however, it does
apply to both. You could use this if reviewing a range of products, especially
before starting to develop new products.

Looking at the British retailer, Marks & Spencer, they have a wide range of
products and many different lines. We can identify every element of the BCG
matrix across their ranges:

 Stars
Example: Lingerie. M&S was known as the place for ladies underwear at a
time when choice was limited. In a multi-channel environment, M&S lingerie is
still the UK’s market leader with high growth and high market share.

 Question Marks/Problem Child

Example: Food. For years M&S refused to consider food and today has over
400 Simply Food stores across the UK. Whilst not a major supermarket, M&S
Simply Food has a following which demonstrates high growth and low market
share.

 Cash Cows

Example: Classic range. Low growth and high market share, the M&S
Classic range has strong supporters.

 Dogs

Example: Autograph range. A premium-priced range of men’s and women’s

clothing, with low market share and low growth. Although placed in the dog
category, the premium pricing means that it makes a financial contribution to
the company.

You can also apply the BCG model to areas other than your product strategy.

For example, we developed this matrix as an example of how a brand might

evaluate its investment in various marketing channels. The medium is
different, but the strategy remains the same-  milk the cows, don't waste
money on the dogs, invest in the stars and give the question marks some
experimental funds to see if they can become stars.
Other more tactical uses of matrixes to support your digital marketing strategy
development include the Smart Insights :

 Content marketing matrix - Use to review your portfolio of content assets

against competitors
 Content optimization matrix - Assess the value of your webs pages in
generating leads and sales

 Content distribution matrix - Review your options for building traffic for a
website using different channels - similar to the chart above

What to watch for?

The BCG Model is seen as simplistic and it can be difficult to classify products
in smaller businesses where the relative market share is too small to quantify.
It’s also based on the concept that market share can be achieved by spending
more on the marketing budget.

Original Sources
Barksdale, H. C. and Harris Jr., C. E. (1982). Portfolio Analysis and the
Product Life Cycle. Long Range Planning. (Vol. 15 Issue 6). p74-83.

BCG Growth-Share Matrix

REVIEWED BY WILL KENTON
 
 Updated May 3, 2019
What Is a BCG Growth-Share Matrix?
The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses graphical
representations of a company’s products and services in an effort to help the company decide
what it should keep, sell, or invest more in.

The matrix plots a company’s offerings in a four square matrix, with the y-axis representing the
rate of market growth and the x-axis representing market share. It was developed by the Boston
Consulting Group in 1970.

Understanding a BCG Growth-Share Matrix

The BCG growth-share matrix breaks down products into four categories: dogs, cash cows, stars,
and “question marks.” Each quadrant has its own set of characteristics. See below:

Dogs (or Pets)

If a company’s product has a low market share and is in a low rate of growth, it is considered a
“dog” and should be sold, liquidated, or repositioned. Dogs, found in the lower right quadrant of
the grid, don't generate much cash for the company since they have low market share and little to
no growth. Because of this, dogs can turn out to be cash traps, tying up company funds for long
periods of time. For this reason, they are prime candidates for divestiture.

Cash Cows
Products that are in low-growth areas but for which the company has a relatively large market
share are considered “cash cows,” and the company should thus milk the cash cow for as long as
it can. Cash cows, seen in the lower left quadrant, are typically leading products in markets that
are mature.

Generally, these products generate returns that are higher than the market's growth rate and
sustain themselves from a cash flow perspective. These products should be taken advantage of
for as long as possible. The value of cash cows can be easily calculated since their cash flow
patterns are highly predictable. In effect, low-growth, high-share cash cows should be milked for
cash to reinvest in high-growth, high-share “stars” with high future potential.

Stars
Products that are in high growth markets and that make up a sizable portion of that market are
considered “stars” and should be invested in more. In the upper left quadrant are stars, which
generate high income but also consume large amounts of company cash. If a star can remain a
market leader, it eventually becomes a cash cow when the market's overall growth rate declines.

Question Marks
Questionable opportunities are those in high growth rate markets but in which the company does
not maintain a large market share. Question marks are in the upper right portion of the grid. They
typically grow fast but consume large amounts of company resources. Products in this quadrant
should be analyzed frequently and closely to see if they are worth maintaining.

Special Considerations
The matrix is a decision-making tool, and it does not necessarily take into account all the factors
that a business ultimately must face. For example, increasing market share may be more
expensive than the additional revenue gain from new sales.

[Important: The matrix is not a predictive tool; it neither takes into account new,
disruptive products entering the market nor rapid shifts in consumer demand.]

Because product development may take years, businesses must plan for contingencies carefully.

Key Takeaways

 The BCG growth-share matrix is a planning tool that uses graphical representations of a
company’s products and services,
 The BCG growth-share matrix is used to help the company decide what it should keep,
sell, or invest more in.
 The BCG growth-share matrix breaks down products into four categories: dogs, cash
cows, stars, and “question marks.”
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Related Terms

What Is a Dog?
A dog is a business unit with a small market share in a mature industry. It neither
generates strong cash flow nor requires a big investment. 
more
What Makes a Cash Cow?
A cash cow is one of the four BCG matrix categories that represents a product or
business with high market share and low market growth. 
more
Problem Child
A problem child is one of the four categories in the growth-market share matrix
describing a business with a small market share in a rapidly growing industry. 
more
Star Definition
A star is a candlestick formation that happens when a small bodied-candle is
positioned above the price range of the previous candle. 
more