Learn how to work the BCG Matrix and better manage your company’s products! – WAU
The BCG matrix is a method used to analyze the performance of products and services offered by a company, focusing on how they are accepted by their consumers.
If all the products or services in your business brought the return stipulated in the company’s planning would be great, wouldn’t it?
However, the market is a roller coaster. In a certain period, a product is billing well, while in another moment, it goes downhill, that is, it brings irreparable losses.
It is because of this volatility that you must analyze the life cycle of your products and make smart marketing decisions.
But, how to do that?
The way out is to bet on the famous technique BCG matrix.
Through it, information about your product mix will be clearer for both you and your team.
Want to know how to apply this theory in your company? So, keep following our post to know the main information.
What is BCG matrix, after all?
The BCG matrix is the technique used to analyze the performance of products or services of a particular company in relation to its acceptance by the consumer.
Despite being widely used today, this tool is old.
She went created in 1970, per Bruce Henderson, to the American business consulting firm, Boston Consulting Group.
Since then, it has enabled entrepreneurs to have a systemic view of their products or services, being able to redouble their attention to those who enhance cash flow and ignore others that demand a lot of effort, but do not bring the desired result.
The path to reach the results of the BCG matrix is quite simple, however, it is necessary to know each step to find the desired numbers.
Learn how the BCG matrix works
The BCG matrix is divided into two blocks. The first refers to market growth rate. While the second is called market share of the product.
Each block contains two divisions where product groups are placed. See below what they are!
BCG Matrix presentation template
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Every entrepreneur dreams of having a card filled with this type of product, after all they supply the company’s cash without the need to demand much effort from the marketing team or the sales team.
The success of this type of product is justified by its quality and the reputation it has with the company’s customers.
Like dairy cows, these products are responsible for bringing a lot of profits to the sales team, however, an effort is needed to achieve the desired result.
For this type of product, for example, it would be ideal to unite the marketing team with the sales team to achieve the return of desire.
These are products that we are not sure which way it will go.
Although the marketing and sales team are looking for your success, it is not possible to drive sales, as they are newly launched products and, so far, are company bets.
Here, it is necessary to be calm and wait for the response from consumers regarding the news you have just created.
These products are those that every entrepreneur wants away from his or her chart, as they do not generate much profit for the company.
In such cases, it is necessary to assess whether the investment is worthwhile or not.
Here is a warning: if the recovery plan involves a lot of time and money, forget about this product and try to find another solution.
The BCG matrix analysis cannot be performed just once. Remember at the beginning of this article when we said that the market is a roller coaster? Well, the explanation is there.
As many changes occur, whether positive or negative, in the sales area of your company, it is essential that the tool is applied constantly. This because, nothing prevents a dairy cow from becoming a pineapple in the future.
I used the BCG matrix, now what?
Every product begins its cycle in the group of “questions”. Here, it is considered a trend in the market, however, it did not bring profits for the company.
To check your change with the consumer, set a limit to re-analyze these products and, if possible, change positions.
When a product is in question, it can go to the following destinations:
In this case, the product does not have the expected result. Therefore, an action plan must be developed to avoid losses and alter its course.
As the moment is critical, there is no chance to wait too long, that is, the product regains its prestige in an established period or it can no longer be part of your product mix.
Make that decision before it’s too late!
Faced with the scary scenario mentioned above, a breath of fresh air: the product can follow another path – the group of stars.
They usually win over the consumer and remain in this position for a long time.
If the success is consolidated, they become a reference in the matter and become “dairy cows”.
Until a new competition appears and they become a new pineapple in their product mix.
When launching a product, it is normal for entrepreneurs to be anxious about its success or failure. However, be patient. There are few cases where a launch immediately becomes a “dairy cow”.
So, be aware that you will start either in the group of stars, pineapples or interrogation. From there, the direction your product will take will depend on your effort and your team.
Remember: products change positions frequently. There is no way to predict when he will be in which phase, especially because he can pass them all.
Advantages of using the BCG matrix
What does a company need to succeed?
To this question, there are several answers, including having a product portfolio that grows constantly and having various forms of market share.
The combination of these factors allows companies to find their balance, even facing some pineapples that are in their portfolio.
With the BCG matrix, you can understand what direction certain products are taking. That way, it aligns your company’s strategies more easily.
The breakeven point is also achieved in relation to those products that generate profit and those that are stuck in your company’s stock.
When products are fitted according to their performance in the BCG matrix, you achieve a more favorable scenario for making decisions that positively impact the business.
The BCG matrix still competitive advantage for the company, as it is also possible to analyze how competitors are performing in relation to certain products.
With this information, you can develop strategies to create new campaigns and products and conquer the market once and for all.
You may also be interested in this other content!
GE Matrix (Mckinsey): what it is, how it works and its advantages
Disadvantages of using the BCG matrix
So far, we have realized the advantages that the BCG matrix brings to your business. However, it hides some factors that we need to break down.
Contrary to what many people imagine, market share cannot be considered the only way to define whether the product you just launched is a success or failure.
To define which segment to operate in, you cannot just use market growth to make your decision.
What’s more, sometimes a pineapple can bring more results in the future than a star or dairy cow.
Even with these disadvantages, the BCG matrix is a very practical tool and can help your business on a day-to-day basis.
Understand when you can use the BCG matrix
For the BCG matrix to be applied correctly, the entrepreneur needs to have an advanced technical domain of analysis and various information about his products.
If you do not have these prerequisites, you can continue with the analysis. Your opinions will not directly impact the result. However, keep in mind what position your products are in (dairy cows, stars, question marks and pineapple) to know which strategy you will adopt in relation to each one.
The BCG matrix cannot be developed with insecurity on the part of its entrepreneurs. When applying it, it is necessary to understand that the health of your company is at stake and, therefore, if your favorite invention becomes a pineapple, discard it immediately to avoid losses in the future.
If you are still unsure and have little time to market, you can invest in SWOT analysis to make the best decisions for your company.
Learn how to create your BCG matrix
Now that you know what the BCG matrix is and how it works, it’s time to practice.
Presentation Template for BCG Matrix
After analyzing all of your products, use this template to present the results to your team! Just fill in the email to receive free:
See below how to develop a perfect BCG matrix!
List your products
Initially, organize in ascending order which are your company’s best-selling products, so that you can include them in the matrix.
Draw a Cartesian chart
It will consist of two lines: one vertical and one horizontal, which will be measured at right angles (90º). The vertical line refers to the market’s growth rate. Its size can vary between 0 to 20%. However, mark the middle of the line with 10%
The horizontal line will determine the relative share of your product, that is, depending on the most direct competitor.
Imagine the following situation: a product (x) sells R $ 250,000.00 and its main chain invoices R $ 500,000,000. In other words: its participation will be 0.5, which is considered half the competition.
On the horizon line, start marking on the left side. Place 10x and end with 0.1. The first number shows that your company sells 10 times more than the direct competitor, while the second, identifies that it sells a tenth that your competitor.
In the center of the line, add the mark 1.0x.
Now, just insert your products in the BCG matrix.
Find out how to handle your dairy cows
With a little effort you can win your place in the sun and fit the long-awaited product in the dairy cows group.
In order for you to succeed when you reach that level, do not stop studying!
Look for references from big companies to learn how they also got to this position, how they evolved, how they became a reference in the market and how they are beating the competition.
Coca-Cola is a great example that we can mention in relation to dairy cows. Launched in 1886, the brand has not yet been surpassed by any competitor.
The negative side of the story is that entrepreneurs cannot follow the company’s steps to the letter. This is because, as is known, the drink has remained the same since its creation, which can be a fatal mistake.
If your product doesn’t find some way to surprise the audience, it probably won’t have the same success as Coca Cola and, consequently, it will become a new pineapple.
So that your company’s financial health is not jeopardized, always try to have a varied product mix. That way, it will open the gap for a new product to be successful.
Applying the BCG methodology in your company is very important to transform possible pineapples into stars or, who knows, even into dairy cows.
If executed correctly, with the products in their respective positions, it will be easier to define your strategies and beat the competition.
After knowing the technique of the BCG matrix, how about discovering how to promote your products to enhance your branding?