What Is the BCG Matrix? (And How to Use It)
Developed by the Boston Consulting Group (BCG), many businesses utilize the BCG matrix to help them figure out how to manage their products, like deciding which ones to keep, scrap, or improve. What is the BCG matrix, though, and how can you use the Boston Consulting Group's matrix in your business strategy?
On this page, we’ll discuss the basics of the BCG matrix (also called the growth-share matrix) and how you can use digital marketing in conjunction with it. If you need help, call us today at 888-601-5359 to speak with a strategist.
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What is the BCG matrix?
The BCG matrix, also known as the BCG growth-share matrix, growth market share matrix, or product portfolio matrix, helps businesses with the long-term planning of their products. This tool helps companies determine which products warrant discontinuing, development, or further investing.
Many businesses offer a variety of products to their customers, such as Johnson & Johnson. They offer a wide array of health and beauty products to customers. Some of these products include soap and lotion for all ages, facial cleansers, make-up wipes, pain relievers, and allergy medication.
With all these products, Johnson & Johnson needs to monitor the success of each of these products to figure out whether they should invest more into the products, discontinue them, or create a new product to replace the old one. This is where the BCG matrix can help.
The four quadrants of the BCG matrix
The BCG matrix fits products into one of four categories. The placement is based on market growth and market share. Each product falls into a different quadrant, which helps your business decide how to deal with different products.
Dogs are products with low growth and low market share. These products are typically viewed as a waste. Money gets tied up into these products, but they do not produce enough of a profit to justify the investment.
Question Marks, also known as “Problem Child,” are products in a high growth market with low market shares. These products are called question marks because it is unclear which way they will swing. Will they rise into the Stars quadrant, or will they drop down to Dogs?
Products that are Stars have a high market share in high-growth markets. These products have the potential to become market leaders. They can eventually become Cash Cows, a quadrant that we’ll discuss next).
Cash Cows are products that have a high market share in low-growth market. These are products that drive revenue for your business.
These are the four quadrants of the BCG matrix. This matrix can help you see where your products fall and help you decide how to proceed next.
How to use the BCG matrix
You know what the BCG matrix is, as well as the four components that define the Boston Consulting Group's matrix. The most value from the growth-share matrix, however, comes from understanding how to use it.
Learn more about using the BCG matrix, based on each quadrant, below:
Summary: Dogs have a small chance of bringing your business a profit. Either remove Dog products or continue to offer them, without any further investment from your business.
Many companies end up pumping money into Dogs and get little in return. Most businesses remove Dog products as these items generally drain resources and waste money.
Some Dog products can generate a small amount of revenue at a small cost, however.
While most Dog products are bad for business, some benefit your business. They won’t generate a large amount of revenue, but they can generate a little cash flow for your business.
This scenario happens with discontinued products.
If someone owns a car that is no longer manufactured, they will still need replacement parts for that car if something goes wrong, for example. While it won’t earn your business a rapid, daily income, Dogs can be a product that earns your business a small profit occasionally.
Summary: Question Marks can become either Stars or Dogs, which is why they demand investing and development to deliver a return. Determine how much a Question Mark is worth to your business before proceeding.
Question Marks are tricky because you can invest a large sum of money into them and see no success. It requires a lot of time and investment to get these products into the Star quadrant. You need to invest a good chunk of money to get a return on these products.
This is a common issue that game developers face.
People who make games and apps create hundreds of games or apps, waiting for one to take off. Many of their games will drop down to Dogs, but it just takes one to rise up and become a Star (like Angry Birds).
When you have Question Mark products, you need to determine if they are worth the investment. These products can fall either way on the spectrum, so you need to prepare yourself for both possible outcomes.
Summary: Stars require cash to produce cash. Invest in Stars, but ensure they deliver a return, to turn them into Cash Cows.
If you want to harness the full potential of Stars, you need to invest money in these products constantly. They bring in a lot of cash for your business, but they also consume a lot of cash in the process.
When you have Star products, you will have a better return on investment (ROI) than other products. Even though you have to pump a large sum of money into these products, they provide your business with a sizeable return.
Stars are important to your business because they ensure future growth. When you have products that are Stars, they turn into Cash Cows.
Summary: Cash Cows perform consistently, especially when it comes to ROI. Milk these products by continuing to support and invest in their success.
Cash Cows are well-established products that people trust and buy consistently. Brand names like iPhones, Tide, Charmin, and Crest are all Cash Cows. These are household names of brands that have built their reputation to attract people to buy them.
When you have Cash Cows, your return is far greater than your investment. The brand name and product quality are well established, so you don’t need to invest much money in advertising that to your audience. They already trust your products and buy them consistently, so you get a greater return on the small investment you make into these products.
You want to milk Cash Cow products as much as possible. It is important that you don’t go overboard with milking them and cause your brand to collapse. You want to get as much as you can out of these products until their popularity fades.
Advantages and disadvantages of the BCG matrix
The BCG matrix is an easy tool to use for any type of business. It’s broken down simply to help businesses understand where their products stand. Like all strategies, though, the growth-share matrix has its advantages and disadvantages.
When you use the BCG matrix, you can see all your products laid out clearly. You can compare your success products to your least successful products. This enables you to think about why that product succeeds and how you can apply that to your products that are struggling.
The Boston Consulting Group matrix makes it easy for you to review your products and compare one another. It helps you focus on products that are worth the time and investment. You can eliminate products that are wasting your company’s money and invest them somewhere else.
However, there are limitations to this method. The BCG matrix does not account for external factors that alter a product's performance. It only looks at market share and growth.
There may be other factors that influence why your Dog products perform poorly or why your cash cows succeed. The matrix doesn’t account for this, which makes it difficult to know why your products perform well.
It also doesn’t account for the fact that some products help other products succeed. For instance, one of your Dog products may be the reason that a Cash Cow product succeeds. If you stop investing in the Dog product, it could hurt your Cash Cow’s performance.
The BCG matrix is a great starting point for your business. You can see where your products fall on the spectrum and analyze all other factors that affect its position. This will help you get the full picture of your product and where it stands in the market.
3 tips for using digital marketing with the BCG matrix
Digital marketing methods can help you promote your products better based on where they fall in the BCG matrix. Based on the matrix, you can use certain digital marketing strategies that work best for that product.
1. Use cost-effective marketing methods for Cash Cow products
Cash Cow products drive in the best revenue for your business, but you don’t want to invest too much in marketing them and take away from your profit. It’s still important that you cost-effectively market Cash Cow products because you can reach new potential customers.
You’ll want to use cost-effective digital marketing methods to help you market your products and keep the cost low. There are many campaigns you can run to save money and target new audiences.
One strategy, social media marketing, is a great option for your business. This digital marketing method is free and is used by various businesses from many industries. Using this low-budget marketing method helps to expose your brand online and earn additional leads for your business.
You can create a social media profile on any social network to connect with your audience. When you do, you should always use the platform your audience uses the most. Using your leads’ most frequented networks will help engage your leads better and guide them towards conversion.
These social media platforms enable you to share content with your audience. You can create posts, share links, and share photos or videos with your audience. It’s a great and cost-effective way for you to connect with them and market your products.
You can also use a method like email marketing to connect with your audience. This method enables you to send information directly to interested leads.
Your business will obtain subscribers through your website by using an email sign-up bar. People who are interested in hearing from your business will subscribe. This builds a direct connection between you and your audience.
Email is a very cost-effective method for your business. For every $1 spent, you have the potential to earn $44! It’s a great way to generate a positive return on your investment.
By focusing on cost-effective methods, you can help your Cash Cow products continue to drive in revenue for your business.
2. Use PPC ads to generate buzz about Question Mark products
Question Mark products are tricky because they can lead to either success or failure. However, you don’t want to give up on these products, as they have potential to earn a profit for your business. To help you see the interest in your Question Mark products, pay-per-click (PPC) advertising is a great option.
PPC ads are paid advertisements that appear above the organic listings in the search results. They are tagged with the word “ad” to indicate it is paid content.
To run a PPC campaign, you’ll need to select keywords you think your audience will use to find your ad. Next, you’ll bid for your ad’s placement. You’ll need to set your maximum bid, which is the amount you are willing to pay each time someone clicks on your ad.
Your quality score and maximum bid will determine your ads placement. Once you have your placement, you can launch your campaign.
PPC is a great option to help you figure out your Question Mark products because it drives in the most qualified leads. In fact, 65% of all high intent searches result in clicking on an ad. People who are the most interested in your products will click on your ads.
This will help you see how many people are interested in your Question Mark products. If your PPC campaign performs well, you can pump more resources into your Question Mark products to help them become Stars. You will know that people are interested in this product, based on the PPC ad’s performance.
If your PPC ad does not perform well, there’s a good chance that your product will become a Dog. You can still try other strategies to see if you can make the product a Star, but it may be an opportunity for you to focus on a different product.
PPC can help your business figure out which Question Mark products will thrive in your market.
3. Use SEO to help people find Star products
Your star products are products that are thriving in your market. They require a good chunk of money, but they also drive terrific revenue for your business. Search engine optimization (SEO) is a great method to help your Star products continue to thrive.
When people look for products, they conduct searches. They turn to the organic results to find the business that suits their needs best. When you invest in SEO, you can help more leads find your Star products.
Since your audience uses keywords to find information on the Internet, SEO mainly operates on keywords. You want to make sure you use the right keywords for your campaign to attract quality leads that are the most interested in your products.
This method will help you boost your website’s ranking in the search results. More leads will find your Star products and want to purchase them or learn more about them. Using SEO strategies ensures that your Star products continue to attract new leads and earn conversions for your business.
WebFX can help you strengthen your digital marketing plan
The BCG matrix helps your business shape your strategy for the future. A strong digital marketing plan can help you move products into different quadrants or strengthen them in their current quadrant. If you want to see the best results with your digital marketing campaign, you should partner with an experienced digital marketing company.
At WebFX, we have years of experience creating digital marketing plans that focus on helping your business strategy. We’re a full-service digital marketing company that utilizes various digital marketing methods to help you promote your products.
We have a team of 150+ experts that are dedicated to your campaign. Our award-winning team of internet marketers will help you promote your products to your audience.
If you’re looking for a company that drives results, look no further. To date, we’ve driven over $1 billion in sales and over 3 million leads for our clients. We focus on driving success for our clients first.
Our clients love the work we do, too. In fact, we have over 550 client testimonials that attest to the quality of work we do for them. Check them out to see what its like to partner with a digital marketing expert like WebFX!
Start strengthening your business strategy today
A strong digital marketing plan can help you figure out where your products stand in the market. If you’re ready to start driving better results for your business, contact us online or call us today at 888-601-5359 to speak with a strategist.
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