In today’s fast-paced and competitive market, businesses need more than just a good product to succeed; they need a robust product portfolio strategy.
Whether you’re a start-up or an established organisation, understanding and effectively managing your product portfolio is crucial for sustainable growth and long-term success.
So, let’s explore what a product portfolio strategy is, why it’s important, and how Marketers can develop winning strategies for their organisations.
What is a product portfolio?
A product portfolio is the collection of products and services that a company offers to its customers. It includes everything from flagship products to niche offerings.
Managing a product portfolio effectively helps businesses maximise returns, optimise resource allocation and ensure market relevance in the short and longer term.
Why is a product portfolio strategy important?
1. Enhanced market coverage: Ensures your business caters to different customer segments and needs.
2. Optimised resource allocation: Helps prioritise investment in products that promise the highest returns.
3. Risk diversification: Spreads risk across multiple products, reducing dependency on a single product.
4. Growth opportunities: Identifies and nurtures products with high growth potential and customer needs and usage habits evolve over time.
Key elements of a product portfolio strategy
1. Market segmentation:
Divide the market into distinct customer groups with similar needs or behaviours and tailor your products to meet these specific needs.
2. Product mix decisions:
Decide on the size and structure of your product portfolio.
o Width: Number of different product lines.
o Length: Total number of products within each line.
o Depth: Variants of each product.
o Consistency: How closely related the product lines are.
3. Product positioning:
Clearly define the role and unique value of each product in your portfolio, to stand out from competitors and attract its customer target.
4. Portfolio priorities and investments:
Use strategic frameworks such as the BCG Matrix (Boston Consulting Group Matrix) to help you define key priorities across your entire product portfolio and align brand investment accordingly.
o Stars: High growth, high market share products. Invest heavily to maintain growth.
o Cash cows: Low growth, high market share products. Generate steady revenue with minimal investment.
o Question marks: High growth, low market share products. Decide whether to invest heavily or phase out.
o Dogs: Low growth, low market share products. Consider discontinuing these to free up company resources.
5. Product Life Cycle management:
Every product goes through four stages: Introduction, Growth, Maturity and Decline.
Each stage requires different strategies to maximise profitability and product lifespan.
Take the time to learn about Product Life Cycle (PLC) as a key Marketing principle.
6. Competitive analysis:
Continuously monitor competitors’ offerings to identify gaps and opportunities in the market.
As consumers get more products and services choice year after year, make sure you regularly evaluate your product portfolio and assess how it meets your customer targets’ needs versus existing and new competitors.
7. Innovation and new product development:
Product innovation is a great way to recruit new consumers into your brand and/or increase usage occasions amongst existing brand users.
Innovation can be on your existing products and/or be new brand offerings, informed by consumer feedback and market trends.
Before you invest company resources ideating, developing and launching new products, be clear on the business objective and strategic role of each new product to be added to your portfolio.
Expanding a product portfolio is relatively easy but don’t lose sight of the direct impact on company resources (budgets and teams).
Developing a product portfolio strategy
Assess current portfolio: Analyse the performance of your existing products using tools like SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) as well as financial, market and brand health data.
Set objectives: Define clear, measurable goals for your portfolio, such as increasing market share, boosting profitability or accelerating consumer recruitment into your brand.
Identify opportunities: Look for unmet customer needs or gaps in the market that your products can fill.
Allocate resources: Invest in high-potential products while ensuring efficient resource allocation across the portfolio.
Monitor and adjust: Regularly review product performance and be ready to pivot strategies based on market changes or new data insights.
Practical tips for success
Adopt a Customer-centric approach: Always keep the customer’s needs at the forefront of your strategy.
Leverage data and analytics: Make informed decisions based on robust internal and external data sources.
Stay flexible: Be adaptable to market changes and internal company dynamics.
Foster collaboration: Work closely with other departments like R&D, Sales and Finance to ensure cohesive strategy implementation.
Conclusion
A well-crafted product portfolio strategy is more than just a tool for managing products; it’s a comprehensive approach to achieving business excellence.
By understanding and applying the principles of product portfolio management, businesses can enhance their market position, drive growth and ensure long-term success.
So, take the time to assess, strategise and refine your product portfolio—it’s an investment that will pay off in the long run.