The Boston Consulting Group's Product Portfolio Matrix

Like Ansoff's matrix, the Boston Matrix is a well known tool for the marketing manager. It was
developed by the large US consulting group and is an approach to product portfolio planning. It
has two controlling aspect namely relative market share (meaning relative to your competition)
and market growth.

You would look at each individual product in your range (or portfolio) and place it onto the
matrix. You would do this for every product in the range. You can then plot the products of your
rivals to give relative market share.

This is simplistic in many ways and the matrix has some understandable limitations that will be
considered later. Each cell has its own name as follows.

Dogs
These are products with a low share of a low growth market. These are the canine version of 'real
turkeys!'. They do not generate cash for the company, they tend to absorb it. Get rid of these
products.

Cash Cows
These are products with a high share of a slow growth market. Cash Cows generate more more
than is invested in them. So keep them in your portfolio of products for the time being.

Problem Children
These are products with a low share of a high growth market. They consume resources and
generate little in return. They absorb most money as you attempt to increase market share.

Stars
These are products that are in high growth markets with a relatively high share of that market.
Stars tend to generate high amounts of income. Keep and build your stars.

Look for some kind of balance within your portfolio. Try not to have any Dogs. Cash Cows,
Problem Children and Stars need to be kept in a kind of equilibrium. The funds generated by
your Cash Cows is used to turn problem children into Stars, which may eventually become Cash
Cows. Some of the Problem Children will become Dogs, and this means that you will need a
larger contribution from the successful products to compensate for the failures.

Problems with The Boston Matrix

 There is an assumption that higher rates of profit are directly related to high rates of
market share. This may not always be the case. When Boeing launch a new jet, it may
gain a high market share quickly but it still has to cover very high development costs
 It is normally applied to Strategic Business Units (SBUs). These are areas of the business
rather than products. For example, Ford own Landrover in the UK. This is an SBU not a
single product.
 There is another assumption that SBUs will cooperate. This is not always the case.
 The main problem is that it oversimplifies a complex set of decision. Be careful. Use the
Matrix as a planning tool and always rely on your gut feeling.
Ansoff's Matrix - Planning for Growth

 Lesson
 Exercise
 Answer

This well known marketing tool was first published in the Harvard Business Review (1957) in an
article called 'Strategies for Diversification'. It is used by marketers who have objectives for
growth. Ansoff's matrix offers strategic choices to achieve the objectives. There are four main
categories for selection.

Ansoff's Product/Market Matrix

Market Penetration
Here we market our existing products to our existing customers. This means increasing our
revenue by, for example, promoting the product, repositioning the brand, and so on. However,
the product is not altered and we do not seek any new customers.

Market Development
Here we market our existing product range in a new market. This means that the product remains
the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new
region, are examples of market development.

Product Development
This is a new product to be marketed to our existing customers. Here we develop and innovate
new product offerings to replace existing ones. Such products are then marketed to our existing
customers. This often happens with the auto markets where existing models are updated or
replaced and then marketed to existing customers.

Diversification
This is where we market completely new products to new customers. There are two types of
diversification, namely related and unrelated diversification. Related diversification means that
we remain in a market or industry with which we are familiar. For example, a soup manufacturer
diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we
have no previous industry nor market experience. For example a soup manufacturer invests in
the rail business.

Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for
growth.

Gap Analysis

Gap analysis is a very useful tool for helping marketing managers to decide upon marketing
strategies and tactics. Again, the simple tools are the most effective. There's a straightforward
structure to follow. The first step is to decide upon how you are going to judge the gap over time.
For example, by market share, by profit, by sales and so on.

This will help you to write SMART objectives. Then you simply ask two questions - where are
we now? and where do we want to be? The difference between the two is the GAP - this is how
you are going to get there. Take a look at the diagram below. The lower line is where you'll be if
you do nothing. The upper line is where you want to be.

What is Gap Analysis?

Your next step is to close the gap. Firstly decide whether you view from a strategic or an
operational/tactical perspective. If you are writing strategy, you will go on to write tactics - see
the lesson on marketing plans. The diagram below uses Ansoff's matrix to bridge the gap using
strategies:

Strategic Gap Analysis

You can close the gap by using tactical approaches. The marketing mix is ideal for this. So
effectively, you modify the mix so that you get to where you want to be. That is to say you
change price, or promotion to move from where you are today (or in fact any or all of the
elements of the marketing mix).
Tactical Gap Analysis

This is how you close the gap by deciding upon strategies and tactics - and that's gap analysis.

Marketing Plans

 Lesson
 Exercise
 Answer

Marketing plans are vital to marketing success. They help to focus the mind of companies and
marketing teams on the process of marketing i.e. what is going to be achieved and how we intend
to do it. There are many approaches to marketing plans. Marketing Teacher has focussed upon
the key stages of the plan. It is contained under the popular acronym AOSTC.
ANALYSIS.
OBJECTIVES.
STRATEGIES.
TACTICS.
CONTROLS.

Stage One - Situation Analysis (and Marketing Audit).

 Marketing environment.
 Laws and regulations.
 Politics.
 The current state of technology.
 Economic conditions.
 Sociocultural aspects.
 Demand trends.
 Media availability.
 Stakeholder interests.
 Marketing plans and campaigns of competitors.
 Internal factors such as your own experience and resource availability.

Also see tools for internal/external audit:

 SWOT.
 PEST.
 Porter's Five Forces.
 Marketing Environment.

Stage Two - Set marketing objectives.

SMART objectives.

 Specific - Be precise about what you are going to achieve.

 Measurable - Quantify you objectives.
 Achievable - Are you attempting too much?
 Realistic - Do you have the resource to make the objective happen (men, money, machines,
materials, minutes)?
 Timed - State when you will achieve the objective (within a month? By February 2010?).

If you don't make your objective SMART, it will be too vague and will not be realized.
Remember that the rest of the plan hinges on the objective. If it is not correct, the plan may fail.
Stage Three - Describe your target market
 Which segment? How will we target the segment? How should we position within the segment?
 Why this segment and not a different one? (This will focus the mind).
 Define the segment in terms of demographics and lifestyle. Show how you intend to 'position'
your product or service within that segment. Use other tools to assist in strategic marketing
decisions such as Boston Matrix , Ansoff's Matrix , Bowmans Strategy Clock, Porter's Competitive
Strategies, etc.

Stage Four - Marketing Tactics.

Convert the strategy into the marketing mix (also known as the 4Ps). These are your marketing
tactics.

 Price Will you cost plus, skim, match the competition or penetrate the market?
 Place Will you market direct, use agents or distributors, etc?
 Product Sold individually, as part of a bundle, in bulk, etc?
 Promotion Which media will you use? e.g sponsorship, radio advertising, sales force, point-of-
sale, etc? Think of the mix elements as the ingredients of a 'cake mix'. You have eggs, milk,
butter, and flour. However, if you alter the amount of each ingredient, you will influence the
type of cake that you finish with.

Stage Five - Marketing Controls.

Remember that there is no planning without control. Control is vital.

 Start-up costs.
 Monthly budgets.
 Sales figure.
 Market share data.
 Consider the cycle of control.

Finally, write a short summary (or synopsis) which is placed at the front of the plan. This will
help others to get acquainted with the plan without having to spend time reading it all. Place all
supporting information into an appendix at the back of the plan.