Sometimes, you invest heavily in marketing your products so you can launch them and build brand awareness among current and potential customers. Other times, you can sit back and reap the benefits of the time and resources you've already invested. A harvest strategy in a business plan makes sense at the proper moment in your product's life cycle when you have inventory to deplete, and your creative energy is going toward other products.
TL;DR (Too Long; Didn't Read)
A harvest strategy in a business plan is a decision to coast on past marketing investments by relying on a brand awareness you've already built to sell your products.
Reasons for Using a Harvest Strategy
- Discontinued product. If you're planning to discontinue a product, there is no reason to direct marketing resources toward it. However, you may have made the decision to discontinue while you still have plenty of stock on hand. By harvesting the venture, you are able to sell down inventory, bringing in returns on marketing work you've already done.
- Other interests. If your business is putting time and money into developing new products, there is more need to generate income from these investments than from products that have been around for a while and have already paid off your initial marketing efforts. The harvest potential for selling tried and true products is a valuable opportunity and should be a low-key component of your overall marketing mix.
- Cash cow. If your product has caught on to the point where it has become a classic or a staple, you may not need to market it much. You can use your resources more effectively elsewhere, or you can simply withdraw your earnings as profit rather than reinvesting in the business.
Harvest Strategy Process
Your harvest strategy will work differently if you're discontinuing a product rather than relying on its past success. If you're taking your product off the market completely, you'll also stop investing resources in materials and production. You're interested in clearing your shelves for new opportunities as much as earning some extra money from inventory you already have. You may even reduce the price for clearance to move as much of it as possible.
If your product is a cash cow, and sales are steady without continued marketing investment, you'll keep producing even though you're not marketing. The marketing investment just isn't necessary anymore, but if you don't keep manufacturing, you won't have any product left to sell.
You may also choose to reduce or eliminate spending on capital improvements such as new equipment or equipment repair. Your decision whether or not to do so will depend on the return you expect to receive on this investment and whether the product is still selling well enough to justify it.
Advantages and Disadvantages of Harvest Strategies
A harvest strategy earns you income with minimal investment. This maximizes profit and also frees up resources for other endeavors. Whether you're exploring new entrepreneurial activities or spending more time with your family, a harvest strategy is an opportunity to move ahead without giving up the revenue that your product can still provide.
However, if you switch to a harvest strategy for a product that still has some life left in its cycle, you may lose the opportunity to earn as much as you could if you continued with your marketing efforts. Your lack of enthusiasm for the product could also create a self-perpetuating cycle, making your offerings less interesting to your customers as well. The success or failure of a harvest strategy often comes down to whether it is implemented at the right time and in the right way for the right product.