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What Is a Growth Share Matrix and How to Use It in Digital Marketing

What Is a Growth Share Matrix and How to Use It in Digital Marketing

Digital marketing is constantly evolving. Strategies are changing, some channels that used to work well for us, start to lose their significance, and new platforms take their place. To stay on top of this game of ever-shifting priorities, marketers have to be able to evaluate the performance of every channel they are using to communicate their message.

There are different strategies to do that, like tracking KPIs and building attribution models, for example. But to shake things up, and look at things from a different perspective, marketers can borrow a page from the business manager’s book and try using the growth-share matrix.

What Is the Growth-Share Matrix?

The growth-share matrix is a business management framework designed to help companies evaluate the cost-performance ratio of their products and business units. It represents a plot on a two-dimensional plane, divided into four quadrants. Each section is marked by a symbol indicating the level of success and profitability of the business or product placed there. A company can analyze the performance of its assets, determine where they should be positioned in the framework, and leverage the information to decide whether the product is worth the investment.

Growth Share Matrix

The growth-share matrix was designed in the ‘70s by the founder of the Boston Consulting Group, Bruce Henderson. This is it’s often referred to as the Boston Consulting Group growth-share matrix or the BCG growth-share matrix. Over time, the matrix had been and still is, successfully used by hundreds of companies and business schools around the world.

Before we discuss how it can be adapted to serve a purpose in your digital marketing strategy, let’s first elaborate further on how the growth-share matrix works.

How does the Growth-Share Matrix Work?

In the past, the growth-share matrix was used to help companies decide which products to invest in and which to eliminate, based on their market share and growth rate. Since nowadays market share is not that important a factor compared to when the matrix was invented, it has been replaced by the business’s adaptability to the changing environment.

As mentioned, the company analyzes the income, or cash-flow, a product generates, compared to the speed of its growth, and determines in which of the four squares of the diagram to place it. Based on the locations of the company’s assets, it can be decided how company resources should be distributed amongst them.

With time, the natural lifecycle of products causes them to shift position in the framework. By monitoring their movement, companies can understand which assets are performing well and which are becoming a liability.

The Four Quadrants of the Growth-Share Matrix

The four quadrants of the growth-share matrix represent the different stages of a business’s lifecycle. By analyzing their catalog according to the matrix, companies are able to build a portfolio of their products.

In the words of the growth-share matrix inventor, Bruce Henderson:

The need for a portfolio of businesses becomes obvious. Every company needs products in which to invest cash. Every company needs products that generate cash. And every product should eventually be a cash generator; otherwise, it is worthless. Only a diversified company with a balanced portfolio can use its strengths to truly capitalize on its growth opportunities.

Stars, the Top Performers

Stars, the Top Performers

The stars are high growth, high share businesses that are the top performers of the company. They are growing fast and bringing in profits, but the funds are not necessarily enough to support the product.

Companies should invest in these businesses because they have the potential to become cash cows when their growth has reached a peak. Then they will need less investment and will generate more income that can support the other products, and grow revenue.

Cash Cows, the Income Bringers

Cash Cows, the Income Bringers

The cash cows are low growth, high share businesses that have reached their growth peak and are now growing slowly but generating large amounts of income. The profits they bring in exceed the reinvestment required to keep them afloat.

Companies should “milk” the cash cows to reinvest the profits in promising stars that are expected to generate large profits once they’ve unfolded their potential.

Question Marks, the Wannabes

Question Marks, the Wannabes

The question marks are high growth, low share businesses that can be marked as the wannabes of the company. They are growing fast but are bringing in questionable profits.

Here, the company should observe other circumstances to evaluate how much potential the Wannabes have of becoming stars. If the chances are low, the question marks are not worth the investment and should be eliminated.

Pets, the Underdogs

Pets, the Underdogs

The pets are low growth, low share businesses that companies, basically, have to get rid of. They are the underdogs that do not bring in enough profits and are a waste of resources. It’s basically the end of the line for that product or business.

However, if the company sees any hidden potential in the pet, they can try to undertake strategic actions to reposition it on the framework in order to save it.

So far, so good. But how do we make this work in digital marketing?

How to Adapt the Growth-Share Matrix for Digital Marketing

What makes the growth-share matrix such an effective tool? It’s effective because you can use it to evaluate the performance-income ratio of any side of your business by taking in the values that the two-axis represent.

In digital marketing, we rely on different channels to communicate a message to our audience. Without measuring and tracking the performance of campaigns it’s not possible to justify our marketing budget and account for the investment it requires.

Moreover, without the proper measurement and qualification of the results that different strategies deliver, it becomes hard to adjust and refine our efforts.

Lucky for us, in the digital world, we are rarely short on data. Analyzing the intel our marketing tools generate, enables us to see the bigger picture of our omnichannel strategy and navigate it to successfully find the path to the customer’s heart, without breaking the bank.

Processing this data and leveraging it to position marketing channels on the growth-share matrix, will allow us to maximize ROI and optimize resources.

1. Estimate the Performance of Channels

Tracking key performance indicators, or KPIs, allows you to monitor how channels perform and estimate if they deliver the results you desire. The metrics you should pay attention to vary for different channels and can differ depending on the goals of your campaign.

You can find a detailed guide on how to assess the overall performance of your marketing channels in DevriX’s article Top 10 KPIs to Assess Overall Marketing Performance:

Top 10 KPIs to Assess Overall Marketing Performance

KPIs alone, however, do not give you enough information to measure the ROIs of every platform you use, they can only show you what results in they deliver. Whether these numbers lead to actual sales, is a whole different thing.

This is where tracking conversions and attribution modeling comes in.

2. Measure the ROI of Channels

Measuring conversions enables you to put solid dollars behind every strategy and estimate the true value marketing channels bring to your campaign – the ROI.

Building attribution models enables you to pinpoint every touchpoint your customers have with your business and accurately credit conversions across your omnichannel strategy. Leveraging this information you obtain a clear view of which channels bring in paying customers and which artificially inflate your KPIs with vanity metrics.

For example, a social media campaign can drive immense traffic to your website, but if these visitors do not convert into customers, traffic becomes a vanity metric.

3. Position Channels in the Growth-Share Matrix

Once you have your data ready, it can be used to position different channels across the growth-share matrix framework, to monitor how your marketing campaign benefits from them.

To illustrate this better, let’s imagine a hypothetical campaign for an eCommerce store where you are using email, content marketing, social media, and search engine PPC ads, to boost sales.

Digital Marketing Growth Share Matrix

Star
You’ve been putting effort into your blog for some time now, and your content marketing strategy is starting to pay off. Your blog posts have regular visits, people are clicking your CTAs, and paying customers are starting to come. The star of your campaign is performing great, the ROI is still growing. You should continue investing in this strategy because, obviously, you are doing something right and it has the potential to become a cash cow soon.

Cash Cow
The social media campaign you’ve started is reaping awesome results. You’ve built popularity and have a substantial audience of loyal followers that you manage to keep engaged. Your posts and client interactions bring in sales, and cash is flowing in. You should continue to “milk” your social profiles and use the income and popularity to support your blog and other projects.

Question Mark
For some reason, your search engine PPC ads are not doing well. People are coming to your website from the ads, but they are not buying anything. Maybe you are targeting the wrong audience, or need to do content adjustments. Whatever the problem, you should investigate, and decide whether this channel is worth the investment or is becoming more of a liability.

Pet
Email is a great strategy, and you’ve put a lot of effort into trying to make it work for you, but it’s simply not delivering any traffic or desired ROI. You should reconsider your investment in it and maybe discard it to diversify the resources it uses elsewhere. If you still believe it can be useful, try to reposition in on the matrix by exploring other strategies you haven’t tried.

4. Regularly Update the Matrix

Depending on the dynamics of your industry, you need to update the digital marketing growth-share matrix regularly.

While the lifecycle of marketing channels has little in common with that of a business or a product, performance rates here change as well. Channels’ positions will shift on the board and this can serve as an indicator that you need to make adjustments in your strategy.

Monitoring these movements regularly enables you to catch issues in time and take precautions. When you notice a channel that was a promising star expected to become a cash cow soon has started failing instead, you can react in time to save it.

Recap

Leveraging a growth-share matrix gives you a tighter grip on the performance of your marketing channels. By updating it often and monitoring the performance of your marketing strategy, you can optimize the ROI of different campaigns and distribute resources accordingly.

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