If a company wants to get an overview of its product portfolio, it typically takes a trip to Boston. Well... not the American city, but the Boston Model planning tool (better known as the Boston Matrix), which was developed by the Boston Consulting Group back in the early 1970s. If you're new to the simple model, here's a sharp introduction to how you can illustrate your company's products.
When dealing with a larger product portfolio, it is both relevant and important to examine and analyse which products should be sold, retained or invested in more. The Boston Model is a powerful tool to provide an overview of your company's product portfolio, allowing you to determine how best to use your resources to maximise profit.
The model divides the company's products into four fields, which are formed by a y-axis and an x-axis. The y-axis defines the market growth in percent. A high market growth means that many consumers demand the given product - it is therefore an attractive part to be in. The X-axis represents the relative market share, which is measured against the company's main competitor. Market share indicates the extent to which a product can generate revenue.
The four fields are each illustrated with a unique symbol representing a certain level of profitability:
Foto: <a href="https://webamp.dk/academy/boston-modellen/">Webamp: Boston modellen</a>
Any company's products will typically change market position over time - this can be due to new consumers in the market, trends, developments in technology or changes in society. It is therefore a good idea to keep an eye on the position of your products.
The star defines products that are in a position of high growth and high relative market share. Stars are important products for a company as they help to build a strong brand. However, maintaining a product here requires more effort, which means that they are not necessarily a good business. It is therefore important to incorporate them so that they can survive without too much promotion. That way, they will typically become a cash cow. If not maintained in this position, they may risk becoming dogs.
The question mark will typically refer to new products that are still in the introduction phase. This also means that these products have a low market share but are in a fast growing industry where companies need to make an active effort to gain a share of the market. The question mark has the potential to become a star, but if they do not succeed, growth will slow and they will become dogs.
A dairy cow is defined by the fact that the product has a large market share in a slow-growing industry. These products are not particularly interesting to analyse, but they are attractive to companies as they generate money without the need for much marketing. Like a dairy cow, the company takes out as much as it can - though at the risk of leaving the product weak.
Dogs are products that are in a position of low relative market share in a slow growing market. They will typically be dairy cows that are either not cared for or where time has run out. They thus do not generate a very profitable profit, which harms the possibility of future investments in the business. This means that they should either be disposed of or repositioned, otherwise they could end up costing the business a lot of money.
This made you so much wiser about the simple Boston Matrix and how you can use it to sharpen your company's product portfolio. Knowing your products and being able to allocate your resources profitably is an essential part of running an effective and growing business. If you need sparring and advice in finding ways to market your products online or to create digital visibility, don't hesitate to send us a message.
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