Boston Consulting Matrix as an Evaluation Tool for Affiliate Portfolios

by rishil on June 22, 2010

I have covered the Boston Consulting Matrix as a tool over at SEOmoz a while back (2008 actually!). I find it very useful in evaluating the need for improvement based on priority. Often the time and resources are limited, but the amount of work we have that we can do limitless. I use BCG to evaluate my own sites which lead me to be able to work on profitable sites, and make decisions on where to allocate resources such as time, energy and budget. It can be argued that you don’t need advance tools or frameworks to do this, but often the visual demonstration is a much better motivator.

I wanted to refresh the technique with a real life example from my own sites and visually demonstrate the potential for Advance Marketing Strategy to be used in Online Marketing.

For the sake of those who haven’t heard of it before or those who want a quick refresher:

Although popularly known as the Boston Consulting Group Matrix, the actual name of this well-known marketing theory is the Growth Share Matrix or the Product Portfolio.

For those who don’t know of the BCGM, here’s a VERY simple version:

The BCGM is used for those businesses that have more than one product in their portfolio. It is used to determine what priorities should be given to products. The theory stipulates that to maintain long-term value, a product portfolio should include base level products that are entering the market and need support, and established products that are profitable earners.

It analyses two dimensions: market share versus market growth. The bigger the market share or the faster the market growth, the better it is.

The BCG Matrix places products into four distinct categories:

  • Stars – high growth rate and high market share
  • Cash Cows – low growth rate and high market share
  • Question Marks – high growth rate but low market share
  • Dogs – low growth rate and low market share

I have selected a sample of 13 sites of various ages and level of effort put into them – and recorded Visits and Revenue over the same period of time. None of these sites bring in award winning incomes, but together make a decent disposable cash for the level of effort I have put into them (i.e next to nothing). Some are newer than others, and some are in less competitive niches – most of these considerations should ideally come after the BCG Matrix analysis.

As the BCG Matrix actually uses Growth vs Market share as metrics, which really cant be used as they stand for this analysis, I have swapped them with visits (growth) and revenue (share). The symbols represent:

  • C=Clicks
  • V=Visits
  • £=Revenue

I included clicks as an indicator – and an extra visual – after all it’s those clicks that make me the money!

As you can see from the chart below (I worked as a linear chart to make the differences visible – this may not be the ideal way to present that – I do have my quirks!) the various sites have varying level of success (or failure).

Charting Visits over Revenue

Charting Visits over Revenue

Other Metrics e.g Break Even Point

I would immediately be tempted to start improving the ones that are making me the most revenue, or maybe spending all my time on the ones that don’t bring me any revenue. In order to place the earnings in context, I added the Break Even Point (Orange strike through) to the chart to show me those that were below profit margin. I add loads of other data to visually guide me – in this instance I have done that before the BCG Analysis – I normally add additional metrics after I have categorised the sites into the different points of the BCG and then bunch them together on one chart. These quick view metrics are additional pointers in the decision making cycle.

Adding the Break Even Point

Adding the Break Even Point

Over Laying the BCG Matrix

Jsut keeping the points, I overlaid the data over my Boston Consulting Affiliate Matrix to see visually how each site fell into the different categories (I should have really labelled those bubbles, call me lazy!):

Boston Consulting Matrix for Affiliate Portfolio

Boston Consulting Matrix for Affiliate Portfolio

As you can see, the BCG Matrix confirms the data and conclusions from the charts – that the sites that make me the least money are in effect dogs, that the sites with high visits and high revenue are stars. Interesting to note that I have one Cash Cow- which is defined by low visits, but high revenue – an immediate indicator that I can do one of two things:

  • Improve the traffic to that site and get much higher revenue – which may involve a lot of work.
  • Create more sites that sit in that particular niche as the return is much higher (which is easier potentially than the former solution).

Isn’t the BCG Too Much Work ?

Now looking at the charts you may feel that the extra step of creating the BCG is superfluous – with only 13 sites it is indeed. But my portfolio is over 100 sites, with plenty of plans to grow. With that many sites the original charts would have too much data for me to decipher visually. If I was only analysing 13 sites, then I would probably intuitively mark my chart without the need for the BCG:

Noting the Stars and Cows

Noting the Stars and Cows

The BCG gives me a one glance view as to what I should analyse further.With this visual aid, I can identify profitable niches, high traffic niches, and cut out the excess fat after all if all these sites are of the same age, have the same amount of effort put into them, then aren’t I better of concentrating on the money sites? Of course you need to check these additional metrics against the category “Dogs” to make sure you don’t ignore a brand new site, or get rid of it. At the same time the “Question Marks” are interesting sites – they get the visits, but not the revenue – which means that the monetisation model may be wrong with all other things held equal.

It is at this point I would bunch say, all the dogs, and then add in other data on this chart, such as age of domain, back links, profit etc – this will help mee hone down on “real dogs” to shell.

I hope the model comes to use for at least some of you. I cant say that this may the best use of the BCG Matrix, nor can I say I adapted it well – all I can say that the way I use it works for me.

Protip: You can also use this method to evaluate pots of keywords and make almost similar deductions and improve focuses.

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Rishi Lakhani is an independent Online Marketing Consultant specialising in SEO, PPC, Affiliate Marketing and Social Media. Explicitly.Me is his Blog. Google Profile

{ 4 comments… read them below or add one }

Uttam June 22, 2010 at 2:48 am

I think it’s definitely an edge, and reminds me to implement it some more. Thanks!

Reply

KirstyM June 22, 2010 at 9:05 am

Fascinating read Rishil!!

Lots of affiliates just get their heads down and plough on without taking time for proper analysis. In the past I have found that when I’ve taken the time to find out where my “Cash Cows” were I’ve been surprised and realised I was spending effort in some of the wrong places!!

Mind you, one thing the matrix can’t show is where the best place is to spend your effort for maximum return. You may very well have a site doing high EPC for low traffic but the actual work involved in increasing the traffic might be ridiculous. But hey… that’s affiliate marketing for you, and if it was straightforward it wouldn’t be fun ;)

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Macreid June 22, 2010 at 5:30 pm

This is good post, I will keep this in mind. If you add more video and pictures because it helps understanding :)

Reply

Gab Goldenberg June 30, 2010 at 9:30 pm

You could also use this to assess various sites that you are considering buying…

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