HomeBlog Cash Cow? Don’t Neglect the Market Requirements Document

Cash Cow? Don’t Neglect the Market Requirements Document

October 11, 2012 | By Pat McAnally

Executives looking for the next big thing tend to focus their attention on rising stars, the darlings of PR firms and investors. But pity the poor manager who hears that his or her product line is regarded as a cash cow. Typically found in mature segments with strong but stable market share, this label is applied to products and business units when they are still producing strong revenue and making more than they spend.

In 1970, the Boston Consulting Group created its famous Growth Share (or BCG) Matrix, designed to help executives make strategic planning decisions. It introduced a powerful set of labels – rising star, cash cow, and dog – that continue to be used in the business lexicon.

Executives looking for the next big thing tend to focus their attention on rising stars, the darlings of PR firms and investors. But pity the poor manager who hears that his or her product line is regarded as a cash cow. Typically found in mature segments with strong but stable market share, this label is applied to products and business units when they are still producing strong revenue and making more than they spend.

Unfortunately for cash cows, management often decides on a strategy of reduced investment because, even though the revenue and profit numbers are high, the growth rate is relatively low. Portfolio planning and resources for product enhancements are given short shrift, and marketing budgets and campaigns are drastically cut. What often results is an undernourished cash cow with its feet set firmly on the long road to the boneyard.

What can product managers do to help their cause? A common mistake of those running mature portfolios is to rely on a set of well-worn and unchallenged internal assumptions about their markets. We strongly recommend that product managers partner with their marketing colleagues to investigate what’s changed. A great place to start is the market requirements document (MRD), which, in many cases, hasn’t been updated in years.

The inputs are not just about revenue and market share. Do a deep dive into market dynamics and economic factors by target segment. What are the trends in category spend? What is the variability in growth by geographic or industry segments? Are small and medium-sized businesses buying more than enterprise accounts? Look for changes in the competitive landscape. How have customer needs evolved from industry, buying center and persona perspectives? Most importantly, what disruptive influences are at play that will influence those customer needs? We’ve worked with clients who have experienced some real “aha” moments by uncovering opportunities in previously neglected market segments or emerging gaps that can be filled by product enhancements.

The MRD is also a good framework to use for organizing information to present to management when pleading your case for continued investment. Best practices in animal husbandry demonstrate that dairy cows need high-quality food to continue producing good milk. Mature, profitable segments that spin off a lot of cash need to be nourished as well.

Pat McAnally

Pat McAnally is Research Director, Portfolio Marketing, at SiriusDecisions. She is a seasoned marketing executive with more than 20 years of experience in product and solutions marketing and management, sales enablement, thought leadership and analyst relations. Follow Pat on Twitter @patmcanally.
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