What Is Dairy Cow Product (Cash Cow)? Definition of Dairy Cow Product (Cash Cow), Dairy Cow Product (Cash Cow) Meaning and Concept
A dairy cow or cash cow product is a product of a company 's portfolio that is characterized by requiring little investment and generating a lot of liquidity .
That is, a dairy cow product produces a large income for the company without the need to invest a lot of capital.
These products are characterized in that their growth levels are low or they simply no longer have market growth . However, their level of participation is very high. Therefore, products classified as cash cow are very important for any company because it allows them to maintain a good level of positioning .
Additionally, they are products that are in the maturity phase. For that reason, they have a large market share, as is the case with traditional Coca Cola or McDonald's Big Mac. These products generate a high level of profitability due to the high volume of participation achieved. Although its growth is minimal.
It is important to mention that with this type of product, companies do not have to invest much in communication campaigns because the products are well known in the market and are preferred by consumers . Therefore, they already have a well-established position in the market.
Characteristics of dairy cow products
The main characteristics of the dairy cow product are:
- His growth rate is low.
- They have a high degree of market share.
- They generate liquidity to support other products in the company's business portfolio.
- They produce constant and stable cash flows of money.
- They need little level of investment .
- They make a lot of money for the company.
How is the cash cow or dairy cow product located in the BCG matrix?
Indeed, the BCG matrix (Boston Consulting Group) is used by companies to analyze their product portfolio. This analysis is carried out based on the degree of growth and participation of the products.
Of course, the matrix has two axes. The vertical axis measures the level of growth and the horizontal axis the degree of market share. Furthermore, the matrix is divided into quadrants. The cash cow or dairy cow product is located in quadrant III. This indicates that it is a product with low growth and high market share.
Cash cow How is it located in the BCG matrix?
What does a company expect from a dairy cow product?
Companies that have within their business portfolio products classified as cash cow or dairy cows, expect the following results:
1. Generate cash flow
First of all, companies hope that their products will become cash cows so that it will generate a very positive cash flow for them. This is essential to recover the initial investment and for the company to continue growing and developing new products.
2. Preserve market share
Second, the company will seek to maintain its high market share among competing brands or products . Since, if you lose market share, you could lose profitability. Thus, the product runs the risk of having to leave the market and enter the decline phase.
Naturally, most companies achieve these results because the dairy cow product is in the mature phase. This implies that the consumption habits of customers are quite stable and it is very difficult for them to change.
3. Steal market share
Fourth, the company tries to steal market share. As the cash cow product is in the maturity stage, its growth is very weak. The company must create incentives to attract consumers from other brands or companies that offer the product in the market. These small increases in market share could lead to a significant increase in profits.
4. Increase customer consumption
Ultimately, the company hopes to increase its market share by getting its current customers to consume more of the product. In this way, they can achieve that the company's sales increase, and consequently the income and profits.
Dairy cow What does a company expect from a dairy cow product (cash cow)?
Strategies that can be applied
Among the most important strategies used in the marketing mix of dairy cow products we find:
- Product: Diversify brands and models.
- Price: Lower prices to match or beat the price of the competition.
- Distribution: Implement an intensive distribution system.
- Communication: Highlight the benefits and advantages of the brand or product.
In conclusion, it can be said that cash cow or dairy cow products are highly appreciated by companies. For this reason, they are products that companies take great care of, especially because they represent a low cost, high income and, as a consequence, very good profitability. In addition, they help finance the other products in the company's business portfolio, especially the question mark and star products.