Cash Cow in Marketing: Definition, Matrix & Examples

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  • 0:00 What Is a Cash Cow?
  • 1:45 Advantages of Cash Cows
  • 2:50 Disadvantages of Cash Cows
  • 3:05 Lesson Summary
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Lesson Transcript
Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

A cash cow is a part of portfolio analysis in marketing. In this lesson, you'll learn what portfolio analysis is and how to pinpoint cash cows in your business.

What Is a Cash Cow?

A cash cow is a product with a high market share in a low or no growth industry. 'Cash cow' is a designator from the portfolio matrix, or a diagram that is used to determine the future potential of a product.

To create a portfolio matrix, draw a diagram with industry growth on the vertical axis and market share on the horizontal axis. Then, separate the diagram into four squares, or quadrants. Let's take a look at an example:

Portfolio matrix example

Each quadrant has a name based on the characteristics of products that fall into that quadrant.

A star is a product with high market share in a growing industry. This product has a high potential to make money in the near future due to its preferred position and the upcoming growth in sales as the industry expands.

A question is a product with low market share in a growing industry. This product needs to be carefully evaluated to determine if the marketing needed to entice consumers to purchase it will result in profits.

A dog is a product with low market share in a flat industry. With the lack of growth in the industry, the only way to improve sales is to entice customers away from other competitors, and due to its non-preferred status, that will likely only occur with heavy marketing and price discounting. The company is generally advised to terminate the product and reinvest these resources into a more promising product.

And finally, a cash cow is a product with high market share in a low or no growth industry. This product is preferred by consumers, as shown by its high market share, and not very interesting to new entrants due to the flat sales in the industry. Products with this status can bring in profits to the company for many years - often until technology renders it obsolete - hence the name 'cash cow.'

Advantages and Disadvantages of Cash Cows

Why would we care about cash cows? Well, cash cows have several advantages for the company that offers them. Let's assume for a moment that you are the owner of a widget company, and your company falls into the cash cow category - by virtue of its 70% market share in the widget industry and the stability of sales (low to no growth annually). Here are some advantages you would realize by having this product:

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