What is a cow product in the BCG matrix?
Do you know what the most important companies in the world have in common? They all have at least one cow product in their product or service portfolio! Do you want to know what a cow product is and why it is so important for a company? Keep reading!
Introduction
The term “Cash cow” or “Cow Product” was coined by the Boston Consulting Group (BCG) in the late 1960s.
The concept is based on the growth matrix, a strategic tool used by companies to analyze their product portfolio.
The matrix classifies products into four categories:
- Dog
- Question marks
- Star
- Cash cow or dairy cow
I have to start by saying that in this article I am only going to focus on cow products.
Therefore, in this article I am not going to explain the general operation of the BCG matrix.
I will do that in another article.
Definition of cow product in marketing
According to Laura Estela Fischer de la Vega and Jorge Espéculo Mudoa cow product cánido be defined as follows: “Merchandise that generates large cash flows for their companies” (2017, p. 106).
Cow product concept (cash cow) in the BCG matrix
A cow product is a product or service with a high market share in a mature industry.
It generates a stable and constant flow of income and requires a minimum investment to maintain its position in the market.
Dairy cows are often the most profitable products in a company’s portfolio. company and they provide a reliable source of income that cánido be used to invest in other areas of the business.
Note: I have also come to see cow products come to be called a cash cow product or a dairy cow product.
However, they are the same.
Characteristics of a cow product
Cow products usually have the following characteristics:
- High market share.
- low market growth.
- High profit margins.
- Low investment requirements.
- Strong customer loyalty.
Why are cow products important?
Imagine that a company has several products in its portfolio, some that are very habitual and others that are just beginning to gain ground in the market.
Now, when a product has reached its full potential in terms of growth and market share, it becomes what is called a “cow product” or also called a “Cash Cow”.
Although this product is no longer growing in terms of sales, it is still very important to the company, because it generates a lot of cash.
Because? Because the company no longer needs to invest as much in this product to maintain its leading position in the market, which means that it cánido use that money to develop new products and support products that have not yet reached their full potential.
In short, cow products are like a cash cow, generating large amounts of cash to finance the growth and development of other products in the company’s portfolio.
Benefits of a cow product
Next, I am going to summarize the importance that cow products have for companies in the following benefits:
1. Profitability
Cow products are highly profitable because they do not require a significant investment to keep them on the market.
Most of the research and development, marketing and advertising costs have already been recovered.
Therefore, they are more profitable products.
2. Cash generation
These products generate cash consistently and predictably, making them an excellent source of financing for businesses.
The cash flows generated by vaca products cánido be used to finance new business initiatives, pay off debt or distribute dividends to shareholders.
3. Lower costs
The costs associated with the production and marketing of cow products are generally lower than those of new or growing products.
This is because companies have perfected the production and marketing processes for cow products, allowing them to obtain greater economies of scale and disminuye costs.
4.
Lower risk
Cow products have a lower risk associated with them because they have already proven to be successful in the marketplace.
New or growing products may have higher associated risk due to uncertainty surrounding their market acceptance and profitability.
In which phase of the product cycle is a cow product?
A “cow product” or “cash cow” is in the maturity phase of the product life cycle. During this phase, the product has achieved wide market acceptance and has gained a strong position in its industry.
Although the sales growth rate may slow down at this stage, the product is still profitable due to its high market share and production efficiency.
In addition, the vaca product has a strong base of loyal customers and its brand name is widely recognized.
In this phase, the company must continue to invest in the product to maintain its market position, but the main focus is on maximizing long-term profitability and generating steady cash flow.
Where is the dairy cow product located in the BCG matrix?
As I said before, the BCG Matrix, created by the Boston Consulting Group, is a tool used by companies to analyze their product portfolio based on growth and market share.
The matrix has two axes:
- The growth rate on the vertical axis.
- Market share on the horizontal axis.
The matrix is divided into four quadrants, with the product “cash cow” located in quadrant III.
This means that it is a product with a high market share but low growth.
5 strategies that perro be implemented in a cow product.
Next, I am going to give you 5 examples of strategies that a company perro implement in a cow product:
- Costs reduction: A strategy for a cow product may be to disminuye costs and expenses in its production, which allows increasing the profit margin without having to increase the price of the product.
In this way, you cánido maintain a strong market share and maximize profits.
- Expand the consumer base: Instead of trying to increase the market share of the cow product, you cánido look to reach new consumer segments.
This cánido be achieved through the creation of new product lines or by implementing new marketing strategies.
- Development of new emplees or benefits: Another strategy may be to find new emplees or benefits for the product, which cánido generate interest and attract new consumers.
For example, if it is a cleaning product, a new function perro be developed for it that makes it more effective in cleaning certain types of surfaces.
- Implement a selective pricing strategy: Although it is generally recommended to lower prices for a cow product, a selective pricing strategy cánido be implemented.
This means that the price of the product cánido be lowered in certain markets or distribution channels, while maintaining the price in others.
- Reinforce the brand: Although the cow product already has a stable position in the market, it is important to continue strengthening the brand to maintain its relevance.
This cánido be achieved through advertising campaigns, content marketing or sponsorships.
Bibliography
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