The Product Life Cycle and BCG’s Growth Share Matrix

Businesses typically offer more than just one product and more than just a single service, all of which have to fall under one strategy. That means priorities need to be set as marketing resources get distributed.

But how to prioritize? There lies the challenge.

Different business objectives and considerations can often impose priorities. That’s a fact. Yet if we were to look for the most effective way of allocating marketing resources (during a year let’s say), we need to look first into the Product Life Cycle chart:

In its early stages, a product goes through the hard test. Will it live? Well if it does, it will likely go through the four life cycle stages:

1- Sales growing as the product gets more and more introduced to the market.

2- Once properly established and running, that’s where growth is achieved. More and more adopters are demanding the product and more and more places offering it.

3- But infinite growth is not real (is it?). There comes a time where maturity & saturation are reached. As culture changes, technology advances and new alternatives rise, a product shifts to its last life cycle stage.

4- The decline: while still serving some late adopters and most loyal customers, less and less sales are occurring. Other products and services are being born and introduced in parallel (assuming so at least. Otherwise, it’s the whole business living its last days).

The BCG Growth Share Matrix (called so in attribution to the Boston Consulting Group) divides the portfolio of products into four categories:

1- The Stars: products with highest cash usage and highest cash generation in return. In reference to the Product Life Cycle, stars are products in the Growth stage.

2- The Cash Cows: products in Maturity and Saturation stage, generating high cash returns for so little effort and investment.

3- The Question Marks: products in the phase of uncertainty (Development & Intro). Being in their initial investment stage, they consume high cash and resources but their revenues are still minimal. Will they become stars? Time should tell…

4- The Pets (or dogs): products in their last life cycle stage, the decline. They get least attention, hence least cash usage and in concurrence, generate the least returns. Quite sad!

So now. How are we going to allocate our resources?

Should new products (question marks) take over the big campaigns and events? Or should we keep them for our cash cows? The first need them to complete their establishment and raise the barriers vs. competition. But we also need to promote our cash cows as they are the ones that will generate the highest return on spending.

That is where the big decisions need to be made. With proper product analysis, we know with high certainty where our decisions are leading and how our business priorities should be set too.

Deciding to launch new products must take into consideration the effect this decision will have on cash cows and stars. Alternatively, focusing solely on cash cows, ignoring both stars and new products, will probably have disastrous results on the business by the time the cash cows reach the end of their life cycle. Worst of all: keep investing in “pet” products living their last days, simply because of resistance to change and innovation.

Using the Product Life Cycle and BCG Growth Share Matrix models can help not only marketing leaders to strategize accordingly, but also business leaders to plan sustainably.

The previous article Play with Google Analytics can help classifying products by performance (if these products are sold online). If you’re not familiar with it yet, it’s definitely time to be!