The BCG matrix is used to categorize strategic business units or product lines. This matrix analyzes two factors: market share versus market growth. The market share is the sector within a marked controlled by a particular company or product. Market Growth is the increase in the number of people who buy a particular product or service. The categories in the BCG matrix are: stars which have a high market share and a high growth rate. Cash Cows have a high market share as well, but have a low growth rate. Question marks have low market share and operate in high growth markets.The BCG matrix can help marketers with three aspects in the marketing mix: Product, Price and Promotion.
The BCG matrix …show more content…
Products that fall under question marks can either become dogs or stars, In other words, they either become successful or fail. A huge determinant of the failure or success of a product is the price, simply because price is directly linked with the amount of sales and the amount of profit generated. If marketers classify products under the BCG matrix, they gain more insight on how they operate and will know how to price them. Marketers can price a product classified as a question mark very strategically. They can make the price attractive to customers, but also keeping in mind to leave a space for profits. With strategic pricing for question mark products, they will move up the scale to a 'star ' product. The same should be done for star products so that they excell and become 'cash cows '. When marketers analyze strategies for cash cows, they need to consider that those products are at their peak and should only use pricing strategies to maintain cash cows within their hard won market. An increase in price may drive sales down (especially if it 's an elastic good), demoting cash cows in the product life …show more content…
For example, cash cows are self sufficient, and are at the peak of the product life cycle. Therefore, since they are already successful, they don 't need much promotion like other products. Marketers can instead focus on products like question marks which need lots of promotion since they exist in a fast growing market with little market share. Heavy investment and marketing efforts directed to cash cows is unnecessary unless there is opportunity for a very good return. Instead, additional cash generated from cash cows should be invested in products within markets that have a high growth rate. Promotional strategies directed to cash cows should only be used to maintain their hard won market share. Investing in promotion towards cash cows might not be a smart thing to do since expenses might be passed on to customers, lead to reduction of sales.
The BCG matrix is a beneficial tool not only at aid in constructing business level strategies, but also constructing functional level strategies such as marketing strategies. Identifying products under the BCG matrix and using this knowledge to guide, plan and define a marketing mix allows marketers to gain a competitive advantage and build better