What are Stars and Cash Cows and how to identify them?
Place the product categories in one of the above four quadrants. A Retailer should deal with each quadrant differently as detailed below.
Products with High Profit – High Sales fall under the Star Quadrant
Approach The Founder to closely focus on these product categories to ensure sales or profits do not fall. Ensure adequate variety and innovation in these products to continue the leadership position.
Products with High profit – Low Sales fall under the Cash Cow Quadrant
Approach The products in this quadrant are usually mature and generate high cash for the business. They require less investment and less focus. Nevertheless, they should be monitored closely since they provide the necessary cash to the business. Middle Management can be tasked to focus closely on this category.
Products with Low profit – High Sales fall under the Question Mark Quadrant
Approach The Question Mark products to have the highest potential to become star products. Hence, efforts need to be taken to increase the margin of these products. This can be done by increasing inventory turnover, reducing costs, reconsidering pricing, etc.
Products with Low Profit – Low sales fall under the Cash Trap quadrant
Approach The products in this category may be given lesser attention by top management.
