Harvest Strategy and Cash Cow

Harvest Strategy:

In harvest strategy or harvesting strategy a company set a business plan to reduce or cancel the marketing investment on product.

Management of the company decide whether to boost sale a product need spending. In other words, future revenues of a product cannot be justified after investment on a that product.

The term ‘harvest strategy’ may also refer to a brand or line of business.

When a product of a company reached to it’s end of life, marketing executives choose a strategy to harvest. Executives next aims is to gain profit (maximum) of the remaining product or sales.

Read also: Harvesting and divesting strategy of SBU

Harvesting strategy – cash cow

Companies use a harvesting strategy when a product has reached the cash cow stage. Cash cow refers to a product that makes a profit in a mature market and does not need heavy reinvestment. It is unlikely that sales will increase even if the company invests further in the product.

There would be a much better return-on-investment if profits were spent elsewhere in the company. When implementing a harvest strategy, the company has three options:

• Eliminate or reduce all capital spending on the product. In other words, keep using existing equipment until it no longer works.
• Reduce or eliminate marketing and advertising expenditure. New sales will rely on brand loyalty.
• Eliminate or reduce operating expenses. In other words, only approve expenditure when the return on investment is very high.