The BCG Matrix is a framework widely used by technology companies to manage digital products and define their Growth strategies .
Throughout this article, you will better understand what the BCG Matrix is , how this structure relates to the product life cycle , when this analysis should be done and how to do it in the context of product management .
What is BCG Matrix?
The BCG Matrix (or growth share matrix) is a strategic tool with strong visual appeal, created in the 1970s by Bruce Doolin Henderson, founder of the Boston Consulting panama mobile phone number Group . This framework aims to support companies in managing their product portfolios , analyzing the market share and growth potential of their products.
Considering the product life cycle, the methodology helps managers make the best decisions about keeping or removing an item from the portfolio, in addition to offering relevant data to support product or company positioning strategies.
The BCG Matrix also helps managers have a global view of their portfolios , considering one product in relation to another, evaluating criteria such as sales volume, level of effort and monthly revenue.
In terms of structure, the BCG Matrix is divided into 2 axes and 4 quadrants , as we will see below.
How the BCG Matrix Works
To make it clear how the BCG Matrix works, we will explain each of the items that make it up. But we can already say that it is structured around a vertical axis that indicates market growth and a horizontal axis , which indicates the relative share of the product in the market.
The quadrants should be evaluated in relation to the axes, functioning as a combination of them. This image represents a BCG Matrix model for you to understand better:
bcg matrix
Based on the portfolio analysis , the company must decide which quadrant each of its products is in , which will guide strategic decisions regarding the future of this catalog. Furthermore, the BCG Matrix is not a fixed structure ; it changes over time, so that a product that currently occupies a certain quadrant may later fill another. Find out more!
Axes
The vertical axis corresponds to market growth , which can be classified as high or low. To understand this aspect , companies must look at the numbers for the segment in which the evaluated product is inserted. This is where market research, benchmarking practices and competitor analysis come into play.
Horizontal: relative market share
The horizontal axis corresponds to the relative market share , which can also be classified as high or low. In this case, the company needs to evaluate the percentage that the product occupies in the segment in relation to its competitors.
Quadrants
As we said, the BCG Matrix is divided into 4 quadrants , each corresponding to a category or moment in the product's life cycle (introduction, growth, maturity and decline), which must be taken into account for the company to identify when this cycle has ended and it is time to take the product out of circulation on the market.
Question/Bet
This category corresponds to products that represent an unknown for the company , which is uncertain about how these items will perform in the market. They are also usually the newest products in the portfolio. These items may show potential and even initial sales growth, but they do not yet have a large market share.
Star
The star product is the company's best-seller , with a significant market share and which accompanies the sector's growth.
Dairy cow
The dairy cow product has already shown sales growth, but is currently experiencing a period of decline or stagnation , despite still having a significant share of the market.
Pineapple/Dog
This category includes products with a low market share and which are experiencing a decline or stagnation in sales . When identifying these items, the company should consider removing them from the catalog, as they may be causing financial losses, with no return on the investment made.
BCG Matrix and Product Life Cycle
It is now clear that the BCG Matrix has everything to do with the product life cycle , which is nothing more than the time between the start of product development and its withdrawal from the company's portfolio, considering its time of activity.
In this sense, the BCG Matrix can be a very useful tool for portfolio management , since it allows you to identify the financial return of each product and observe whether the items in the catalog are keeping up with market updates. Based on this analysis, the product team can assess the need to change strategies and the composition of the portfolio , identifying the best time to make the changes.
When to do the BCG analysis
BCG analysis can be performed in different contexts within the Product area and should be seen as a strategic framework to be revisited with some frequency , considering the dynamism of the market. We have separated some situations in which the Matrix can be applied by the team in their portfolio analyses:
Analyze the feasibility and need for launching a new product;
Conquer a new market or expand the company's participation in a given segment;
When a product is causing losses or experiencing a significant drop in sales and popularity among the public;
Important change in the company's segment;
When the technology used in the product becomes obsolete;
If the company has created a new version of an old product and needs to evaluate whether it is worth keeping both in operation;
To keep your portfolio healthy and analyze your catalog's performance;
Understand the level of user engagement with products and refine retention strategies.
These are just a few examples of how the Product team can use the BCG Matrix . Now, the most important thing is to understand how to apply the analysis to your strategy. Come and see!
How to perform a BCG analysis on your products
Check out a step-by-step guide to performing a BCG analysis and managing your portfolio more efficiently!
1. List the products
The first step in building the BCG Matrix is to list all of the company's products to be clear about what will be evaluated. The idea is for the analysis to consider and compare the items, so it is important not to leave any of them out. In this list, you can provide a little more context and categorize the products according to type, for example.
2. Define the objective of the analysis
Next, it is essential to define the objective of applying the method to your product portfolio . After all, keeping this in mind will help guide your analysis. Is the team's goal to understand if there is room for a new product? To assess the viability of a launch? To perform maintenance or a more efficient update of the catalog? Gather the team together to discuss the possibilities and repercussions of using the matrix.
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