A company may have products at various stages of their life cycle, illustrated by a Boston matrix (BCG matrix). The market share of a product is plotted on the horizontal axis with market growth on the vertical axis. Products within a firm’s product mix are classified into four categories used to support a firm’s marketing strategy.
Question mark/problem child: small market share, high market growth. New products are potentially successful but require considerable financial support. They may become stars or fail and become dogs.
Star: high share of a fast growing market. Still requires considerable investment, but profit rises substantially.
Cash cow: high market share but little market growth. Sales revenues high and costs low. Cash flow ‘milked’ to provide funds for new product development.
Dog: both low market share and little prospect of growth. Extension strategies employed or the firm drops the product.
The BCG matrix supports four strategic options:
Sow: investment in R & D and marketing to launch the product, raise awareness and develop distribution channels.
Nurture:investment to turn problem children into stars, increasing promotion and developing new distribution channels and markets.
Harvest: funds from sales of cash cows used to finance other products and improve cash flows.
Plough (divest): liquidate product or sell it to another business.