The Boston Matrix, also known as the Growth-Share Matrix, made famous by Boston Consulting Group helps you understand the market opportunity, appropriate investment level and messaging style. What you are trying to learn is the relationship between the market growth rate and market share. This will get you to potential. Market growth rate = using revenue. Market share = making revenue. You’ll have to find or be able to develop rough estimates of revenue and market share for each competitor. This will enable you to see the complete size of the market and the role your brand is playing.
The best products are referred to as ‘stars’ and are in the high growth, high-income quadrant. As you invest, you have the potential for strong returns with an established product.
Strong moves with media and messaging with stars will pay dividends. Go big. An example of a star category is job boards. There is no limit to the growth potential of that market because people will always be looking for new jobs, and there is no reason a new player couldn’t introduce a new dominant brand.
‘Dogs’ are the opposite of stars. Dogs aren’t generating money and there isn’t strong market growth, meaning major investing will have to happen to even hope for profit. Don’t go all in on media here. Messaging will have to be innovative to break through and earn awareness. Laptops are dogs as a category. Competition and substitution is high and differentiation is hard earned.
Look for ‘cash cows,’ the businesses that are in low market growth areas but generating a lot of cash through outsized or growing market share. These products usually have high awareness and are churn and burn brands for campaigns. Reminders and trigger media will keep revenue coming in. Smart phones are a cash cow category. The market is mature and overall growth is maxed out in the United States. Brands are just reminding consumers to upgrade. And statistically they do every 2.2 years.
‘Question marks’ provide the biggest risk and reward. These are products or businesses with low market share in a high growth market. A competitor to Airbnb would be a question mark because it would undoubtedly play a challenger role in a market that Airbnb is growing almost single handedly. It’s possible that Homeaway or another new competitor could enter and grow with the market as more people adopt home sharing as a practice.
Here you’ll also need to consider where the product is in its lifecycle. The four major stages are Introductory, Growth, Maturity and Decline. Messaging and investment would obviously differ in the growth and decline phases, but by how much depends on where the business falls in a Boston Matrix. A cash cow in decline is still worth some media spend, as long as you are monitoring sales and market trends to know where the end of the line is.
First introduced in 1970, the matrix continues to prove a valuable addition to every brand manager’s toolbox.
Contributed to Branding Strategy Insider by: Adam Pierno. Excerpted and adapted from his book Under Think It.
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