The BCG Matrix:
Communication Strategies



The BCG Matrix - or Boston Matrix - was developed by The Boston Consulting Group in the late 60s as a way for companies to develop strategies for their different product lines. Although the concepts of Cash Cows, Dogs, Question Marks and Stars may described are used more widely in large business they may be applied to business of all sizes.

My goal is to provide you with simple and straightforward tips and advice in using the concepts of the BCG Matrix to help you think about your own business strategy regardless of your size or the number of products or services you market. As well, I will focus on different Marketing Communication Strategies based on how much market share you have and how mature your market is.


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The BCG Matrix: Overview

Here is how the BCG Matrix is typically represented whereby a given product or service is categorized based on how much market share you have and how much the market is growing:

The BCG Matrix


• Dogs are low-performing products or services in a stagnant market and traditional sales and marketing wisdom dictates that they should be sold off or discontinued

• Cash Cows are the ideal products or services that are performing well in a market that is relatively mature. What this means is that your place in the market is not likely to change as fewer competitors are entering the market and you can sustain your high performance with relatively lower effort. Cash Cows are what you would like to have as many of as possible as they provide a relatively stable source of ongoing income with little work required

• Stars are only called as such because they hope is that they will become the next Cash Cows. What you have here is a product that is performing will in a market that is still robust and growing. What this means is that you cannot say how well you will be doing in the future. Moreover, stars require a lot of ongoing investment in terms of sales, marketing and product development dollars in order to keep up with the pace of the growing market and secure you a permanent place in it

• Question Marks are the flipside of Stars and are performing not-so-well in a growing market. What you hope by banking on a Question Mark is that through a concerted sales and marketing effort you will be able to turn the tables and earn a place for yourself in a lucrative market. What traditional business wisdom advises is that you should trim your portfolio of Question Mark product and services down to a manageable level


The BCG Matrix: Basic Assumptions

What does all of this mean to a small-to-medium sized business like yours? Multiple product lines and product investment strategies makes sense talking about multi-million dollar companies but can these concepts apply to smaller business as well? The good news is that they can and that sales and marketing for large companies works using the same principles as it does for smaller ones. Here are some basic assumptions and understandings in order to get the BCG Matrix to work for you.

The BCG Matrix

What is “Market Share”?
Many businesses may never operate at levels in which they consider the term “market share” to be of any significance to them as it is described in the BCG Matrix. After all, are most business that are not of the Fortune 500 caliber in a position to own even 1 or 2 percent of a given market? The answer is that this depends on what your definition of your market is and the reason for the ambiguity is why I substitute the term high performance for high market share.

What is your total market?
Most companies think about their “market” solely in terms of how may customers they have won versus their competition without having a real idea of the actual numbers of people that comprise their actual market. Does that describe you as well? If so, the next question becomes, how should you compare yourself against your competition? For example, is it okay for you to be #2 if you are a smaller company and are making a good profit?

Performance
At the end of the day much of the “hard science” of sales, marketing and business boils down to subjective questions such as these which is why it is more importance to be performance driven than anything else. If you are making a satisfactory profit on a given product or service then you are doing better that 98% of business out there and that is a good starting point. Rather than getting caught up in the technicalities of what the BCG Matrix calls "market share" you should focus rather on whether or not you are doing well enough to break even and then meet your own profit goals.


The BCG Matrix: Total Marketing



The BCG Matrix


Regardless of how you picture your market you should make sure to avail yourself of every opportunity to reach potential customers. Your Marketing Communication Mix should therefore make use of as much of each of the basic types of communications which are verbal, written, electronic and physical. Find out what similar businesses are doing and experiment with what works for you.

Verbal sales and marketing includes in-person selling, telemarketing, seminars, networking, word-of-mouth ad referral marketing. Written communications include flyers, print ads and yellow page ads. Electronic marketing can include generating website traffic using Google AdWords and other online advertising as well as e-mail marketing. Physical marketing includes packaging, point of sale (POS) marketing and special events.


The BCG Matrix: Communication Strategies



Looking at each of your various products and services we can now talk about strategies for effectively reaching customers for each of the various categories of the BCG Matrix. Regardless of how well a given product or service is doing, you should not take for granted its continued success in the future and at the very least your sales and marketing efforts should be focused on gathering continuous customer feedback and ensuring customer satisfaction in doing business with you.

The BCG Matrix




Dogs: Seeing as you will eventually discontinue these products or services you should cross-market these customers to make them aware of your other offerings. You should educate these customers as to why this is a diminishing market – there are likely valid reasons why other customers are no longer interested in these products or services




The BCG Matrix




Cash Cows: Stability is the name of the game for products or services in this category but you should not take these customers and your high market share here for granted. Focus, instead, on maximizing the goodwill you have built up. Make sure to continue asking your customers for feedback and making changes to keep abreast of their expectations




The BCG Matrix




Stars: This market is changing and it is likely that you will need to keep revamping your offerings in this category in order to stay competitive. Stay abreast of innovations in the market that you may adopt and communicate your unique differentiators to customers while building trust with service




The BCG Matrix




Question Marks: For those products or services in this category you want to keep in your portfolio you goal should be to incorporate the features of your marketing-leading competitors and communicate this value to customers. Feedback is also crucial here: ask customers what other benefits they are looking for and try to offer these as well




More than anything else the BCG Matrix should get your thinking about where each of your products places in terms of your given market. As with much of the theory on sales and marketing you should take care not to get bogged down by technical details that do not apply to your business. Rather, stay focused on what you know and plan, execute and keep improving in order to succeed!


Get help with the BCG Matrix!

GO TO:
What is Positioning?Product DifferentiationDifferentiation StrategyMarket SegmentationMarketing SegmentationNiche MarketingBCG Matrix Consultant

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