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What Is a Portfolio Matrix in Marketing? - Definition & Model

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  • 0:00 What Is a Portfolio Matrix?
  • 0:38 How Do We Use It?
  • 2:17 Lesson Summary
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Lesson Transcript
Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

Have you heard of a portfolio matrix? It's a marketing tool used to decide which products are worth keeping and which should be terminated. In this lesson, we'll learn how to create and use a portfolio matrix.

What Is a Portfolio Matrix?

A portfolio matrix is a chart used to define products in terms of both the growth in their industry and their specific market share.

To create a portfolio matrix, first draw a diagram with four squares. The vertical axis of the chart is for growth in the industry, and the horizontal axis is for the market share of the specific product within that industry. Then, each product being analyzed is placed on the matrix in terms of their specific market share versus industry growth.

Here is an example of a portfolio matrix, with some products place on the chart:

How Do We Use It?

Each quadrant has a name that reflects the characteristics of products in that section:

Cash Cow: Cash cows are products in a mature, slow, or no growth industry with a large market share. These products are preferred by consumers over competitors, and there is limited interest in launch of new products in the industry due to the stable sales level. These products can produce profits for the company for many years, often until technology renders the product obsolete - hence the term 'cash cow.'

Star: Stars are products with high market share in a fast growing industry. These products have the potential to be huge money makers for the company, due to their preferred status and the growth of the market.

Question: Questions are products with low market share in a fast growing industry. They are designated with a question mark because they may or may not be viable to continue with. Although the growth in the industry might seem to make them viable, their non-preferred status means they will likely have to drop their price to entice consumers to buy them, which might erode profits enough to make them money-losers. Continuing sale of products in this quadrant needs to be carefully evaluated.

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