The BCG matrix has been successfully used by marketers all over the world for a long time. Find out what it is and how a matrix can help you plan your product mix.
It is very important for a company to understand which of the products are profitable for it, and which are costly, but bring nothing. A very popular assortment planning tool that helps determine product attractiveness is called the BCG matrix. BCG are the first letters of the words "Boston Advisory Group" that developed this matrix. The BCG matrix is a portfolio tool: it allows you to analyze all the products that a company deals with.
The matrix allows you to analyze two parameters. The first is the growth rate of the market segment we need. This criterion tells us about the attractiveness of the market for the company at the moment. The second parameter is the market share that the company has in relation to the most dangerous competitor for the company. This parameter allows us to tell how competitive a given product is in a given category. When determining these parameters, it is very important to be as honest as possible.
According to these two parameters, several groups of goods are distinguished:
· "Stars" - goods with a large market share and a high growth rate. These are the leading products with the greatest potential, often the most recognizable. Such products require large financial investments for their promotion, as long as the market continues to grow. Perhaps in the future they will become cash cows.
· "Cash cows" - products with a large market share and a low growth rate. These products are selling well in a market that is no longer growing and has long been divided. Such products do not require investment in promotion, on the contrary, they give the company a large profit. It is enough for a company to maintain the position of this product as long as possible.
· "Question marks" - goods with a small market share and a high growth rate. These products are not as profitable as the leading products, but as the market grows, they also have a chance of growth. Such goods require high costs, otherwise they can quickly turn into "dogs", respectively, they need to either be developed in order to capture a large market share, or deinvest. The company must analyze the potential of the product, its capabilities, and choose the right strategy.
· "Dogs" - goods with a small market share and a low growth rate. The potential of such products is not very great: they bring little profit compared to other products. Perhaps they have some value, perhaps, on the contrary, you need to get rid of them and focus on something more attractive. Such products require significant costs with uncertain growth prospects. It is not recommended to spend significant funds on such goods.
So the BCG matrix allows us to understand the attractiveness of a particular group of products and determine the strategy for promoting products. It is also important to understand that it is based on one parameter - the analysis of market share, and if there are few competitors in this niche, it will not be so useful.
