This is the next in a series of posts which discuss the tools every good marketer should have in their toolbox. Last time Fishbones, today the BCG matrix or, to give credit where credit is due, the Boston Consulting Group growth-share matrix.
In essence it is a planning tool to guide the management of a portfolio of businesses or brands based on the basic idea that strong share, growing market = good but a weak share in a static or declining market = bad. Its’ perspective is the ability of the portfolio to generate or absorb cash.
So far, so straightforward.
Each business or brand is assessed against two factors – market share relative to market leader and the growth rate of the market it which it competes. The size of the bubble on the chart represents the sales value of the business or brand. Its position indicates its role in the portfolio and the consequent investment policy.
Then comes the bit everyone remembers – cash cows, dogs, problem children and stars (which sounds like a synopsis for a script of the Archers)
The BCG matrix can provide a very helpful initial assessment of a portfolio but beware of two underlying and questionable assumptions:-
- Having a balanced portfolio is necessarily a good thing
- The cycle of problem child to star (or dog) to cash cow to dog is somehow inevitable
Important watch-outs are to make sure you avoid market myopia and define your market from a customer perspective (what market/s are you really in?), and also to ensure your market growth prediction is realistic and not just wishful thinking.
When using the matrix these tips might come in useful
- Dogs can be your best friend if you want to bite the competition on the ankles
- Problem children take a lot of patient loving before they fulfil their true potential
- Stars use up a lot of energy and can be very high maintenance (taking attention from the rest of your team if you’ll allow a mixed metaphor)
- Cash cows must be fed as well as milked if they are to continue to provide good yields (back to the Archers again)
As the saying goes, ‘turnover is vanity, profit is sanity, cash is cash’