what is the Bcg matrix in marketing?
BCG Matrix
BCG matrix was a framework originally devised by Boston Consulting Group to strategically measure the potential growth rate of a company within its industry versus its relative market share. This is also known as the Growth Market Share matrix.
By plotting these factors it is possible to identify which products (or brands/units) a company should invest further in, and which products it diversify away from.
A BCG matrix will help develop a long-term strategic marketing plan to create more profitable products.
what is a cash cow in marketing?
BCG Matrix Cow
Cash cow products deserve your attention. Cash cow brands (or products) are often well established, in constant demand, easy to produce and are therefore extremely profitable.
As cash cow products do not require a lot of investment to maintain a high market share, every company should establish a cash cow to produce a reliable source of income.
These cow products should be milked to produce cash. This can then be invested in "star" products to help establish them as the market leader and to generate higher ROI.
What is the star in BCG matrix?
BCG Matrix Stars
Star products are market leaders which generate the highest ROI compared to any other products. However, they do need continual investment to maintain market leader status.
Stars are big cash generators and cash users. They shine in high growth markets. It is for this reason that companies should invest heavily in star products or brands.
Successfully promoted star products will become cash cows. In the event that a star product is highly innovative, it may suffer from marketplace fluctuations ending up as a dog.
what is a question mark in marketing?
BCG Matrix Questions
Question products are the hardest ones to determine if they will be successful or not. They often have a low market share and consume lots of cash and investment resources.
With high levels of investment behind them, they have the opportunity to become Stars. Conversely, if they fail to gain traction in a fast high growth market, they will become dogs.
Question mark products (brands/business units) can quickly become big loss makers and are often referred to as the "problem child". They need to be watched carefully.
what is the dog in BCG matrix?
BCG Matrix Dogs
Dog products or brands have low growth and low market share. These are not worth further investment as they will put a drain on resources for little improvement in market share.
Whilst "Dogs" do not consume a lot of cash to produce or market, they also generate low returns. Meaning they can unnecessarily tie up time and cash with no long-term value.
Unless these products complement or boost the performance of other products within a company's portfolio, then it is recommended to diversify away from "dog" products.
Growth Market Share Quadrants
BCG Matrix Model Summary
Devised as a portfolio planning tool, or corporate planning tool, the BCG growth-share matrix was first conceived by Bruce Henderson of the Boston Consulting Group back in the 1970's. The concept is based on four quadrants in which a company's strategic business units (SBU) or products/brands are classified.
The quadrants are split into combinations of "market growth" and "market share", hence also being known as the growth-share matrix or growth-market-share matrix. The matrix is scored from low to high on both the x-axis and y-axis. The x-axis generally denotes the market growth rate, or cash usage - with the y-axis denoting relative market share, or cash generation.
Bruce Henderson reasoned that established and mature areas of a business where required to generate significant income (cash cows) which could then be invested into new highly profitable market leading products (stars).
The underlying foundation of Bruce Henderson's model is that an increase in market share will result in an improvement in cash generation. Equally, it assumes that to establish a product in a growing market will require continual investment to produce the goods/services and to increase capacity. This will undoubtedly consume cash.
This is why the matrix highlights the level of cash consumption required versus the resulting cash generation.
Stars
These are well established products or brands with fantastic opportunities to generate large amounts of ROI.
- High growth market
- High market share
- Cash neutral
- Hold
Question Marks
Unsure in which direction these products will go. Known as the problem child(s), they can be turned into stars or end up as dogs.
- High market growth
- Low market share
- Cash absorbing
- Build
Cash Cows
These are well-established and consistently produce cash, however the growth opportunities are limited.
- Low market growth
- High market share
- Cash generating
- Milk
Dogs
Products which have little or no value. They are a drain on resources and cash. It is often difficult to make a profit from dogs.
- Low market growth
- Low market share
- Cash neutral
- Diversify
In summary, as a product, brand or business unit matures, its growth rate may decline. At this stage the product will either become a cash cow or a dog.
During its growth journey, if it established itself as a market leader, then it will result in becoming a cash cow. Its purpose now is to produce cash which can be invested in new stars. If it results in becoming a dog, swift and decisive action is needed to stop these becoming a drain on a business.
Matrix for Apple, Coca Cola, Samsung & Nestle
BCG Matrix Examples
BCG Matrix For Apple
The example BCG matrix for Apple products above is based on various statistics and reports available on the Internet.
BCG Matrix For Coca Cola
The example BCG matrix for Coca Cola above is based on various statistics and reports available on the Internet.
BCG Matrix For Samsung
The example BCG matrix for Samsung electrical/electronic products above is based on various statistics and reports available on the Internet.
BCG Matrix For Nestle
The example BCG matrix for Nestle produce above is based on various statistics and reports available on the Internet.
What Other People Ask
BCG Matrix FAQs
The Boston Matrix is a model which helps companies analyse their portfolio of products, brands or SBUs. The Boston Matrix is a planning tool used in marketing and business strategy. It helps decide which products to invest cash into and which to divert.
The BCG matrix is used to evaluate a company's product portfolio, and can also assess strategic business units (SBUs) such as divisions or individual companies within larger organisations. Both market share and growth rate are plotted against quadrants categorised as Stars, Questions, Cash Cows and Dogs.
To use the BCG matrix, a company will review its portfolio of products or SBUs, then allocate them to one of four quadrants based on their market share, growth rate, cash generation and cash usage. This is then used to determine which products receive investment, and which are diversified from.
The BCG matrix is used in marketing strategies to identify where to invest marketing budgets. It will help identify which products to promote to gain more market share. The matrix will highlight what products are considered dogs - therefore you should remove all marketing budget.
The BCG matrix in marketing channel terms can identify what marketing platforms you can use to grow your business. Marketers will assign SEO, Google PPC, Social media, email, TV advertising to one of four quadrants to illustrate cash-generating channels versus cash usage.
For further information on What Is Digital Marketing please read our CEO's blog post.
Boston Matrix applied to marketing channels
Growth Share Matrix
The BCG matrix can be used to visualise which marketing channels or platforms can help grow a company and the expected ROI per channel.
There will be noticeable differences between B2B and B2C businesses and across industry sectors.
For high growth and high returns, we always advise investing in organic search (SEO). At the other end of the scale, we have not witnessed companies growing exponentially and achieving high ROI as a result of Twitter alone.
When you are defining your digital marketing strategy, you should consider the marketing matrix to help establish growth versus ROI.
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