What is a 'Harvest Strategy'

A harvest strategy is a business plan for reducing or altogether eliminating investment in a particular product, brand or line of business due to a company's management determining the required expense to attempt to boost sales any further would not be justified by likely future revenues from the product or brand line. A harvest strategy typically results when a product or brand line has reached cash cow status, the stage of product maturity beyond which a product is unlikely to show any significant sales growth from continued investments in sales and marketing. The term "harvest strategy" describes the process whereby a company intends to harvest the profits from a cash cow in order to fund investment in development or sales and marketing efforts for other products with more promising sales growth potential.

BREAKING DOWN 'Harvest Strategy'

Companies commonly utilize the profits from established brands or product lines to fund the marketplace development of new brands or of existing products perceived to have high growth potential. As an example of a harvesting strategy, the Coca-Cola company might choose to reduce investment in marketing its established soda brand in order to devote funds to sales and marketing efforts designed to promote its line of energy drinks. Another common harvest strategy plan is one employed by a pharmaceutical firm when it determines that an established medication it sells has reached the point of market saturation, can be used as a cash cow, and that a more productive investment of capital is to use the profits from that product to fund research and development or marketing efforts for other medications.

A harvest strategy may consist of simply allowing an established brand to continue generating revenue based on brand name recognition, established market share and customer goodwill, or it may entail gradual elimination of a product or brand line in cases where, for example, technology advances are rendering a product outdated and no longer desired by most consumers. For example, many companies selling stereo systems gradually eliminated sales of record turntables in favor of CD players as compact disc sales soared and record sales declined. Companies generally identify a certain target level of sales or revenues, and once the product or brand drops below that level, the company gradually eliminates the product from its product portfolio.

An Alternative Meaning of Harvest Strategy

The term harvest strategy is also used in regard to equity investments, where it refers to a proposed plan for investors, such as venture capitalists or private equity investors, to reap the profit from their investment. Two common harvest strategies for equity investors are either a plan to sell the company invested in to another company or to make an initial public offering (IPO) of company stock.

  1. Robo Tax Loss Harvesting

    The automated selling of securities in a portfolio to deliberately ...
  2. Brand Equity

    The value premium that a company realizes from a product with ...
  3. Private Brand

    A private brand is a good that is manufactured for and sold under ...
  4. Brand Personality

    Brand personality is a set of human characteristics that are ...
  5. NEM

    NEM is both a cryptocurrency and a blockchain technology company ...
  6. Brand Awareness

    The likelihood that consumers recognize the existence and availability ...
Related Articles
  1. Taxes

    Does Tax Loss Harvesting Really Work?

    This is a regular December tradition for investors, but it may not actually provide any benefit.
  2. Financial Advisor

    3 Tips to Get Started on Tax-Loss Harvesting

    It's tax-loss harvesting season. These three tips will help you reduce capital gains and pay less tax.
  3. Taxes

    'Tis The Season For Tax-Loss Harvesting

    With the end of the year upon investors are looking for ways to reduce their tax bill. One tactic that is often used is tax-loss harvesting.
  4. Taxes

    Tax-Loss Harvesting: Reduce Investment Losses

    The option to bolster after-tax stock returns through tax-loss harvesting can reverse investor gloom.
  5. Investing

    Harvest Your Tax Losses Before Year-End

    You could have some losses in your taxable accounts that you can harvest for a tax deduction.
  6. Managing Wealth

    Extra Cash from Your IRA? Make Money, Duck Taxes

    Figuring out what to do with extra cash from your IRA can be tricky: One of the most important things to keep in mind is how your taxes may be affected.
  7. Small Business

    How Companies Create A Brand

    We take a hands-on approach to creating a brand, and see what it can mean as an investor.
  8. Small Business

    Well-Established Brands Worth Billions

    We look at the most valuable brands in the world, and explain what makes them successful.
  9. Investing

    Norwegian Cruise's Latest Bet: Harvest Caye (NCLH)

    This private island is unique, which could pay dividends for the company. The reviews, however, are mixed.
  10. Insights

    Tech and Auto Companies Dominate World's Most Valuable Brands List (AAPL, GOOG)

    Brand consultancy firm Interbrand released its 2016 ranking of the most valuable brands in the world, and technology and automotive brands dominated by holding a combined 29 positions. According ...
  1. How does brand image and marketing affect market share?

    Building a positive brand image is a must for companies that want an edge over the competition. Learn how marketing and branding ... Read Answer >>
  2. Why is brand equity considered an intangible asset?

    Brand equity is an intangible asset because the value of the brand is not a physical asset and is instead determined by consumer ... Read Answer >>
  3. What are some of the benefits of positive brand equity?

    Learn how having positive brand equity enables companies to make a higher margin on sales and spend less money on marketing ... Read Answer >>
  4. What impact does brand equity have on profit margins?

    Learn how both positive and negative brand equity affects profit margins by influencing profit per customer, sales volume ... Read Answer >>
  5. What are some examples of companies or products that have outstanding brand equity?

    Brand equity is the heart of reputation building for companies and products. With solid equity, the quality of a service ... Read Answer >>
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center