How can you prioritize your client's product portfolio with the BCG matrix?

1 What is the BCG matrix?

The BCG matrix is a two-dimensional framework that classifies products based on their relative market share and market growth rate. The matrix divides products into four categories: stars, cash cows, question marks, and dogs. Stars are high-growth, high-share products that generate high profits but also require high investments. Cash cows are low-growth, high-share products that produce steady cash flow but have limited growth potential. Question marks are high-growth, low-share products that have uncertain prospects and require careful analysis. Dogs are low-growth, low-share products that have low profitability and may be candidates for divestment.

2 How to use the BCG matrix?

To use the BCG matrix, you need to collect data on your client's products, such as their market share, market growth rate, revenues, costs, and profitability. Then, you need to plot them on the matrix, using the horizontal axis for market share and the vertical axis for market growth rate. You can also use different sizes or colors to represent other variables, such as market size or profit margin. Once you have mapped the products, you can analyze their position and performance, and recommend strategic actions for each category.

3 What are the benefits of the BCG matrix?

The BCG matrix has several benefits for management consultants and their clients. First, it provides a simple and visual way to compare and evaluate products based on two key dimensions of competitive advantage. Second, it helps to identify the sources and uses of cash flow within the product portfolio, and to allocate resources accordingly. Third, it helps to align the product strategy with the corporate strategy, and to balance the portfolio between short-term and long-term goals.

4 What are the limitations of the BCG matrix?

The BCG matrix also has some limitations that you should be aware of. First, it assumes that market share and market growth rate are the only factors that determine product success, while ignoring other aspects, such as customer needs, differentiation, innovation, or competition. Second, it relies on historical data and projections, which may not reflect the current or future market conditions or customer preferences. Third, it does not account for the interdependencies or synergies among products, or the costs and risks of implementing the suggested actions.

5 How to overcome the limitations of the BCG matrix?

To overcome the limitations of the BCG matrix, you should not use it as a standalone tool, but as a starting point for a deeper and broader analysis of your client's product portfolio. You should also complement it with other frameworks and tools, such as the SWOT analysis, the value chain analysis, the customer segmentation analysis, or the product life cycle analysis. Moreover, you should validate your assumptions and data with market research and customer feedback, and monitor the results and impact of your recommendations.

6 How to present the BCG matrix to your client?

To present the BCG matrix to your client, you should follow a clear and logical structure that explains the purpose, methodology, findings, and implications of your analysis. You should also use effective visual aids, such as charts, graphs, or tables, to illustrate your points and support your arguments. Furthermore, you should tailor your message and tone to your audience, and anticipate their questions and concerns. Finally, you should provide actionable and realistic recommendations that address the specific needs and goals of your client.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?