by Team AllYourVideogames | Dec 3, 2022 | Entrepreneurship |
A Matrix BCG was created in 1970 by the Boston Consulting Group and is a management tool created to manage portfolios and direct investments.
It is a very efficient methodology, as it prevents you from wasting your time and energy on products or services that no longer have space in the market.
BCG MATRIX: WHAT IS IT?
The BCG Matrix is a graphical analysis that allows you to compare a brand's products with their performance in the market.
The acronym BCG was eventually patented by its creator, the Boston Consulting Group.
Regarding the application of the BCG matrix, it is possible to analyze the products and predict growth or decline in their life cycle.
The methodology also provides a basis for decision making, especially in actions that involve the 4 Ps of Marketing, which are: price, product, promotion and place.
BCG MATRIX: STRUCTURE
The methodology practically consists of a Cartesian plane. According to the model, there are 4 quadrants that assess market share and growth as high or low.
The vertical line shows the situation of market growth. The horizontal line shows the relative share of the product in the market. The following image shows this structure:
Each design (star, question mark, dairy cow and pineapple) represents a stage in the products life cycle. Let's talk more about each element.
A product is a question mark when demand for it is high. However, the company is not managing to develop in this market.
This typically happens when the product is a release. It has little competition and a large market to explore. However, people still don't know about it or have not yet tested its functionality and quality.
Therefore, this product will need large investments in order not to lose the power of the market that is expected of it, such as advertising, for example.
Star products represent the flagship in an organization. They are those that have a high market potential and the company is able to serve a large part of this market.
This product is already consolidated with its consumers, through availability and quality.
They are the products that give less work to the organization, as they already have market share. It is the dream of any company that every product is installed in this quadrant.
However, it is very rare for a product to be consolidated for a long time in each part of the quadrants. They usually have a deadline for each cycle and different strategies will apply.
Dairy Cow Product
Dairy cow products are products or services that, despite having a large market share, are inserted in an almost saturated market.
In other words, there is no point in increasing investments to reach new consumers. On the contrary: this type of product is less and less sought after.
What companies should do in these cases is to maintain investment and attention in the products included here, as efforts to improve these results would be wasted by external factors beyond the companies' control.
Each quadrant has its particularity. However, this is what poses the biggest problem for a company.
It demands attention in the sense that it is draining your energies and investments and not giving you the expected return.
Within the sales cycle, pineapple products have not achieved a satisfactory market share and their market is in decline. The question to be asked here is: is it worth investing in this type of segment?
Its share of sales is no longer satisfactory and improving this scenario would be costly and effective only for a short period of time.
Learn More: What is a portfolio and 10 tools to promote yours
BCG MATRIX: INTERPRETING THE RESULTS
Products from your business that fit into the dairy cow quadrant still bring a good financial return to your company.
However, it is not feasible to reinvest the funds raised with themselves. In this sense, it is possible to allocate this value to products of the question mark quadrant.
Products in the star quadrant also deserve your attention. It is likely that they will still support financial investments, but for a limited time. The tendency is for them to become dairy cows in the future.
If all products tend to follow this cycle. A prudent alternative is to invest part of your resources in new product launches or improvements to existing products.
It is to reverse this cycle that cell phone companies release a new version of their devices every year.
In theory, a product can go through all these cycles, starting with a question mark and going counterclockwise. Until it becomes a pineapple and is eliminated from the market.
However, there is a warning point in this product management model. He does not consider the market as complex and only analyzes the demand share perspective.
However, other factors can influence the performance of your products and should be considered. To complement the analysis of a BGC matrix, you can also apply a study of the SWOT matrix.
BCG MATRIX: ASSEMBLE YOURS
As we said at the beginning, the BCG matrix is a great option for you to manage your product portfolio.
With it, you can make decisions such as: entering new businesses, launching new products, allocating resources in a profitable way, etc.
Products with greater market potential deserve greater attention and invested resources. With the optimization of the use of resources, what is expected is that your company will be able to sell more and be more profitable.
In such a dynamic market, the BCG matrix helps your business to monitor these market changes.
It is worth mentioning that the analysis of portfolios needs to be thorough. And before categorizing each product into a quadrant, one should take into account all the details of the products.
Although it was created with a focus on physical products, you can also position services between quadrants.
This type of analysis will always make sense if it helps you make more confident and informed decisions. After all, some criteria are needed, right?
Now that you've learned how to use this management tool, tell us: today, would you be able to tell which quadrant your product or service is in? Leave a comment.