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The Boston Matrix: What it is and how it can help you


From the Resene Trade blog


The Boston Matrix, otherwise known as the BCG (Boston Consulting Group) Model, was created in 1968 to help businesses segment and assess their products. Despite the tool’s half century in use, it is still widely regarded as a handy way to quickly and effectively divide offerings into useful groups.

The Boston Matrix

Basically, it can help you get a feel for how your products/services are doing, and whether you should keep offering them, promote them further, or perhaps stop offering them entirely.

The matrix is essentially a very simple grid. On one axis, it considers how the product/ service is doing in terms of growth within the market. On the other axis, products/services are measured in terms of their market share relative to your biggest competitor. Because of these measurements, you may even see the BCG called the ‘growth-share matrix’.

Throughout the grid, there are four separate compartments; stars, cash cows, problem children and dogs.

Here’s a little more on each section, and how you can maintain and grow your business using this division.

Stars

A star is any product/service that sits in the high growth, high market share corner.

These tend to take a lot of investment, but they also create a lot of income. The tough part about stars is to judge whether or not the market will continue to grow, or whether it will go down.

For example, perhaps your skill in painting outdoor fences is a star as you see a lot of growth for demand for this type of work, and your promotion work helps give you a leg up in taking on a lot of these projects. If the market continues to grow, you may need to continue paying to promote your services for fence painting, and you should continue to reap the revenue benefits from that investment. Should the market slow down, a star can turn into a cash cow.

Cash cows

Cash cows are products/services that sit in the low growth, high market share corner of your grid.

Usually, these are the foundation of your company. Essentially, as their market growth is low, you won’t need to spend much to maintain these products and services. Yet since their market share is on the higher end, they help bring in the revenue, hence the name ‘cash cow’.

Perhaps you receive regular contracts for interior projects where you repaint entire homes. Your company might be well known for this type of job in your local area, so you get a lot of the work and referrals. Running with the ‘cow’ metaphor, these products are usually ‘milked’ to fund other projects (such as stars).

Problem children

Also known as question marks, a problem child is a product/service that has high growth but low market share. Naturally, this can be quite tricky to deal with. If you wish to turn your problem child into a star and take a larger share of the market, you’ll need to look at why your product/service isn't as in demand as that of your competitor. It could be anything from being priced too highly, to not putting enough investment into its promotion. The question is whether you risk investing money in problem children and not seeing them move into the star category and giving you return on your investment.

Dogs

Finally, a dog is one that has low market growth and low market share.

Ideally, your business won’t have many, if any, dog products or services. They will either be making you a loss or a low profit at best, and you may need to consider whether it is something you still wish to invest time and effort into, or to remove it from your offerings completely.

An example of a dog could be if you work occasionally for a builder or developer who regularly has to reschedule your work, interfering with your other clients, has lower than market rates and/or always pays late. It may not be worth your while undertaking their work in future if you have enough other good work coming in that will enable you to work more consistent hours at a higher rate.

Like any marketing strategy or theory, the Boston Matrix is one you can follow to the T or simply glance over occasionally for some direction with your decision making.

If you find you are getting overloaded, it can be a very helpful way to decide which areas to focus on and which areas to exit.

July 2019


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