Therefore, they generated large amounts of revenue compared to the investments made in them. They perform extremely well and have a large buying audience. Products classified as stars are likely your best offerings since they have high growth potential and a large market. However, to understand how the BCG matrix applies to the world of SaaS, we first need to understand the quadrants and what they represent. It is versatile and also relatively accurate.

The BCG is a tool that can apply to several industries or fields. Read More: The Ultimate Guide to Customer Segmentation for SaaS & B2B BusinessesĪbout half the Fortune 500 companies use the BCG matrix and it makes up an integral part of business studies. Below is a graphical representation of the BCG matrix with labels.īy classifying each product based on their investments and revenue, you can make decisions about continuation, capital allocation, and resource delegation for each product. The value of the x-axis increases from left to right, and the value of the y-axis increases from bottom to top. Whereas, the x-axis represents market shares. Four names correspond to four quadrants: star, question mark, cash cow, and pet/dog.Īdditionally, market growth is represented by the y-axis. We assign each quadrant a name to help identify its unique qualities. Therefore, each quadrant represents a specific combination of market share and growth. The matrix defines the relationship between market growth and market share.

Each quadrant has its own set of characteristics, which companies use as a guideline to classify their products. The BCG is a 2×2 matrix, which means there are four quadrants in total. Therefore, it does not work for new ‘disruptive’ products or drastic shifts in consumer demand. Like any theoretical tool, it has certain limitations. Moreover, the BCG matrix is not a predictive tool. Additionally, it is an excellent tool for medium to big companies since they are most likely to have multiple ongoing projects and products. Therefore, the framework is used to determine the degree of profitability of each product by reviewing product portfolios. Hence, the allocation of resources becomes easier since you can make long-term plans for optimal usage of capital. Management popularly uses it to determine the value of a product/service as opposed to the investment made to it. It can help you decide what products to continue, discontinue, or change depending on which quadrant of the matrix they belong to. The BCG matrix graphically represents a company’s products in a matrix form to help them decide on their products. It derives its name from its parent organization: Boston Consulting Group. The BCG or the Growth-Share matrix is a planning tool introduced in 1970.

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