Definition
A harvesting strategy involves maximizing the short-term profits of a product that is about to be withdrawn from the market. This strategy typically includes reducing or eliminating marketing expenditures and other support services, under the assumption that past marketing efforts will sustain the product’s sales until its final phase. The aim is to extract as much value as possible from the product before its discontinuation.
Examples
- Electronic Gadgets: When a new model of a smartphone is launched, the company might reduce the marketing budget for the older models, yet still continue to sell them at a higher margin to maximize profits before completely phasing them out.
- Pharmaceuticals: Before a drug goes off-patent and faces generic competition, the pharmaceutical company may opt not to invest further in marketing the drug, relying on its established brand and patient base to drive sales until it becomes unprofitable.
- Automobiles: An automobile manufacturer might choose not to advertise a particular model that is soon to be replaced by a newer version, using remaining stock to maximize revenue.
Frequently Asked Questions (FAQ)
What is the primary goal of a harvesting strategy?
Answer: The primary goal of a harvesting strategy is to maximize short-term profits from a product by minimizing costs associated with marketing and other support activities, while continuing to benefit from any residual market presence.
When is a harvesting strategy typically employed?
Answer: A harvesting strategy is typically employed during the decline stage of a product’s lifecycle or when a company plans to withdraw the product from the market.
How does a harvesting strategy affect customer perception?
Answer: Depending on how it is managed, a harvesting strategy can either go unnoticed by customers if their needs continue to be met, or it can negatively impact customer perception if decreased support leads to a decline in product quality or availability.
Can a harvesting strategy be used for all types of products?
Answer: Not all products are suitable for a harvesting strategy. It works best for products with strong brand equity or essential necessity, where significant marketing has already established long-term customer loyalty.
What’s the difference between a harvesting strategy and a divestment strategy?
Answer: While both strategies involve withdrawing a product from the market, a harvesting strategy focuses on maximizing short-term profits before withdrawal, whereas a divestment strategy may involve selling off the asset or product line quickly, often prioritizing a speedy exit over short-term profitability.
Related Terms
Product Lifecycle Management (PLM)
The process of managing the entire lifecycle of a product from inception, through engineering design and manufacturing, to service and disposal.
Divestment Strategy
A strategy involving the sale or liquidation of a company or a segment of its operations to cut losses and focus on core activities.
Profit Maximization
A strategy focused on increasing a company’s profits through various revenue-boosting and cost-cutting measures.
Marketing Strategy
A business’s overall game plan for reaching prospective consumers and turning them into customers of their products or services.
Product Withdrawal
The process of removing a product from the market either due to obsolescence, decreased demand, or strategic shifts in focus.
Online Resources
Suggested Books for Further Studies
- “Marketing Management” by Philip Kotler - Provides in-depth discussions on various market strategies, including harvesting strategies.
- “Product Lifecycle Management: Driving the Next Generation of Lean Thinking” by Michael Grieves - Focuses on managing a product through its entire lifecycle.
- “Competitive Strategy: Techniques for Analyzing Industries and Competitors” by Michael E. Porter - Offers insights into strategic frameworks for managing and analyzing different competitive scenarios.
- “Principles of Marketing” by Gary Armstrong and Philip Kotler - An excellent resource for understanding broad marketing principles and strategies.
Accounting Basics: “Harvesting Strategy” Fundamentals Quiz
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