ESTUDIO Y OPTIMIZACION DE DISTINTOS TIPOS DE CELOSIAS 25

These are the key points from this chapter:

• The Boston Matrix was originally developed as a tool to help the alloca-tion of scarce capital across operating companies or divisions.

• However, there is widespread misuse of the Boston Matrix when applied to the world of marketing.

• It can result in a self-fulfilling prophecy if applied to brands: growth falters so support is cut, so growth falters, and so on in a vicious downward spiral.

The Boston, or Growth-Share, Matrix was invented in 1970 by Bruce Henderson of the Boston Consulting Group. It was developed as a tool to help companies allocate scarce resources between competing lines of business in the days when capital was much less freely available through financial markets than it is today. The core assumption was that the growth potential for a given product or service could be judged according to individual market shares and market growth rates. The higher your market share, the higher proportion of the market you control and the more likely you are to make profits through market dominance and economies of scale. On the other hand, a brand with a low share operating within a high-growth market could have the potential for significant increases in business, if only it had the resources to do so.

However, as noted in the Introduction to this book, the application of the Boston Matrix to the world of brand marketing is a complete misuse of it and should never happen: it can so easily result in a self-fulfilling prophecy if applied to brands. The matrix quadrants of ‘Stars’, ‘Cash Cows’, ‘Dogs’ and

‘Question Marks’ were originally conceived to guide the allocation of financial 45

7

resources to categories rather than brands, with investment funds being awarded to business units in growth categories rather than ones in steady state or declining categories. These quadrants are also commonly assumed to be sequential. Thus the application of the Boston Matrix to brands often carries with it the assumption that at some point, when growth falters, a ‘Star’ brand will progress to ‘Cash Cow’, ‘Question Mark’ or even ‘Dog’ status. As growth falters, so investment is withdrawn, often reducing the brand’s competitive-ness, and marketing support is cut, so growth falters further and so on. A spiral of decline sets in that is very difficult to pull out of.

So there are two important aspects of the Boston Matrix (Figure 7.1) that should always be borne in mind before applying it:

1. Since it is a category management tool and was never formulated as a brand management one, the question is: would the continuation of marketing effort behind new strategies have rejuvenated the brand, or would it have been folly to do so? It may be impossible to rejuvenate a brand within its existing category, but what about extending it to other categories or even creating new ones? There are many examples of mature brands that might be defined as ‘Cash Cows’ being refreshed prof-itably and reinvigorated by new investment. This should make any brand owner very wary of a disinvestment recommendation based on a Boston Matrix analysis.

Question Marks Stars

Dogs

Low Market Growth

Market Share

Low Cash Cows

High High

Figure 7.1 The Boston Matrix

Source: The Boston Consulting Group (1970)

2. The model was created in an era before companies fully understood the intangible value of brands. Nowadays a company with a strong brand in a declining category might reach a rather different decision about the future of the brand than would be implied by the Boston Matrix. The brand is now recognized as an asset that should be protected since it is an important component of shareholder value. Informed businesses there-fore no longer ‘milk’ their ‘Cash Cow’ brands in the unthinking way some once did.

So use of the Boston Matrix should be restricted to category management and never extended to the brand level. Given the much-increased availability of funding since the 1970s, it is arguable that the Boston Matrix has had its day and should be consigned to the history books. But it does still have some lingering value as a tool for prioritizing the categories served by a company or brand, so it merits a cautious review. Its terminology has become world famous, but nevertheless it’s perhaps worth giving a brief description of the meaning of each.

‘Dogs’

Where nobody really wants to be is in the bottom left quadrant of this matrix where market growth is low or declining, but so is your market share. It looks as if it could be pretty tough to fight your way out of this corner: it will use up significant resources and perhaps the potential simply isn’t there. Right now, not many people want to be in UK regional newspaper publishing, the major operators having achieved the maximum economies and profits through consolidation, and are now facing serious losses of classified advertising revenues to the likes of Google, Yahoo and MSN. US newspapers are under similar pressures where key categories such as real estate advertising are migrating to the internet. Research in 2007 by ad consultancy Classified Intelligence indicates that nowadays 80 per cent of home sellers start their search online. So, according to the Boston Matrix, regional papers should be disinvested in and disposed of if possible, as the Daily Mail and General Trust tried and failed to do in 2006 with its Northcliffe division of regional and local newspapers. But what about the brand value and customer franchises repre-sented by these titles? Would it have been worth reinvesting in them much earlier and migrating their customers to their online versions pre-Google? Is it too late now?

Sometimes, of course, one company’s ‘Dog’ turns out to be another company’s rising ‘Star’: thus in 2006 Unilever chose to exit from the main-stream frozen foods category by disposing of Birds Eye to Permira for £1.15 The Boston Matrix 47

billion. Unilever had around 15 per cent share in the UK of a category that it judged was going nowhere fast because consumers are more interested in chilled foods these days. It had perhaps soldiered on too long with an outdated but famous Captain Birds Eye campaign that had done nothing to arrest the decline. Belatedly, it empowered a new marketing director, Jerry Wright, to try to breathe new life into the business. A stream of product inno-vations followed, backed up by a provocative new campaign highlighting the deterioration of chilled foods (Figure 7.2).

The business stabilized, but patience was in short supply at an embattled Unilever HQ, already taking heavy flak from investors about its ability to generate organic growth following the failure of its much-vaunted ‘Path to Growth’ strategy to deliver results. Under this plan the decision had been taken that Unilever could earn a better return on its shareholders’ capital by investing its money behind 400 core brands, and this no longer included Birds Eye: the company was put up for sale.

Permira, on the other hand, with an impressive track record of improving the performance of failing businesses, judged that this was another one they could turn around. To Permira, the Birds Eye purchase was a value-building opportunity for its fund-holders’ money. Time will tell whether Permira got a bargain, but there is a good chance that Birds Eye, a long-standing, famous and trusted brand, has a long and profitable life ahead both in and beyond the confines of the frozen food category.

Over the past few years a number of venture capitalists, like Permira, have bought up ‘Dogs’ from parent multi-brand corporations, like Unilever, seeking to focus resources behind their most powerful brands. By reinvesting in the ‘Dog’ brands they’ve acquired, these entrepreneurs have had some success:

• Princes bought the Napolina olive oil brand from Unilever in 2001 for

£8.3 million and repositioned it as an Italian ingredients range. By 2004, it had overtaken Unilever’s Bertolli share of the olive oil category.

• Premier foods bought Ambrosia from Unilever in 2003 and re-launched it in 2005, driving 12 per cent annual sales growth. Strong growth continued through 2006 at 5.5 per cent.

And Unilever is not alone in shedding non-core brands. Being well served by a number of leading toiletries and cosmetics brands, in 2005 Procter &

Gamble divested itself of Yardley, a brand with total US sales of only $10 million. Lornamead has a track record of acquiring and building ‘orphaned’

brands and it bought the 236-year-old brand believing that through rebirth and reinvestment in ‘luxury’, Yardley could get back to the level of popularity it enjoyed 30 years ago.

The Boston Matrix 49

Figure 7.2 Birds Eye against deteriorating food, BBH

Reproduced by kind permission of Birds Eye

As we have seen, ‘Dog’ status is very much in the eye of the beholder, and this is a huge weakness of the Boston Matrix. Like so many management consultant tools, it fails to acknowledge the potential of inspired brand thinking: what value do such tools really have in the era of the intangible asset? Who would have thought that the moribund UK cider market could have been revitalized by Magners’ brilliantly simple expedient of selling the drink in big bottles and serving it poured over ice? How can Boston-style analysis explain the continued and massive investment in the unprofitable, low-growth, high-risk haute-couture market: a ‘Chien’ if there ever was one?

The answer is that the fashion houses have been expert at exploiting the ‘halo’

of haute couture to protect and enhance their mainstream fashion ‘Cash Cows’. Their annual investment in rarefied made-to-measure clothing to be worn only by a tiny number of women, and paraded before them and the world’s fashionistas in catwalk extravaganzas, generates the aspirational publicity that fuels their extensive ready-to-wear, accessory and fragrance operations. Brands like Armani, Chanel, Gucci and Yves St Laurent are in fact complex mixtures of businesses one or other of which can be located in all the Boston Matrix quartiles, but each contributes to the overall strength of these perennial brands as they ride the waves of fashion trends (Figure 7.3).

Over-Figure 7.3 Chanel catwalk

Source: Image supplied by Corbis Corporation. Photograph by Olivier Hoslet

rational business analysis tools can’t hope to handle the very human complex-ities of branded businesses operating successful models such as these.