Today, the preference of companies in the market is to offer a multitude of products, thus raising their productive efficiency and diversifying risks. Many companies manage their marketing through product portfolio, the elements that make up the company’s portfolios are known as business units.
For any company, it is important to handle in detail a constant analysis of its product portfolio, in order to choose the relevant corrective measures. Always keeping in mind that the decision to remove from the market a product that is not profitable for the company is not a simple decision.
A series of external factors, including internal factors that lead to the lack of viability of the said product, should be considered in order to find better alternatives to this situation and the product has a new opportunity in the market.
What is a Product Portfolio?
It is the set of products that a particular company sells, this portfolio is composed of one or several product lines.
Whereas a product line is a group of products with homogeneous characteristics, located in the same category and frequently identified with the same name.
Characteristics of a Product Portfolio
To carry out an analysis of the company’s product portfolio, it is necessary to manage the following parameters, since they are used to know their main aspects and dimensions.
- Amplitude: It is a measure taking into account the number of the different lines that make up the product portfolio that the company sells.
- Length: This measure considers the total number of products manufactured and marketed by the company.
- Depth: It is the measure in which the models are considered, either by size or another variant in each product within the line.
- Consistency: Considers the degree of similarity between the lines, based on the frequency of use by consumers, the method of production, channels used for distribution and price, etc.
It is worth noting that a product portfolio that has a good breadth and depth, allows a better adaptation to the market, depending on the specific needs of its defined segment.
The company uses a mixture of them and their different factors (aforementioned amplitude, length, depth, and consistency) in marketing to determine how its product portfolio should be.
Why is It Important to Have an Adequate Product Portfolio?
The product portfolio is not something that comes out of nowhere to carry out a good design of the said portfolio. First, strategic planning must be carried out to carry out a process that develops and maintains the correlation between the objectives of the company and its capabilities, without missing out on possible opportunities offered by the market due to its constant changes.
The product portfolio is in line with the mission that has been defined. So that it is clear that this mission is no longer the central purpose of the company since its creation. Hence, the importance and relevance of the product portfolio and the different lines that compose it as they try to achieve the broad environment and guidance for the company are market-oriented in terms of the needs of consumers.
Product Portfolio Planning
It is essential in two stages:
1# Analysis of the Current Portfolio
This analysis aims to support decision making, it is advisable to check aspects such as:
- Product design and possible improvements.
- Manufacturing methods, measuring progress or obsolescence in the methods used in production.
- The security offered to users.
- Management development, which is important since those in charge of administrative management make important decisions that could reduce the profitability of the products.
- Commercial team performance.
This analysis will allow us to consider which products are more likely, how important it is to maintain, decrease or increase the investment in these products to keep them in the company’s portfolio. Evaluating its projection based on the analysis of strategic elements according to the attractiveness of the market and its strengths within that market.
2# Growth Matrix
In order to measure growth and market share, the products are divided as follows:
They are those products that have high growth and a high share of market share. In general, they are products that are being launched for the first time on the market, with a great investment and promotions to attract customers.
They are products with low market share but predict high growth. In general, they are already in the market, but they require investment to maintain their share and become a star product.
They are products with a high share of market share, with low growth projections. They are products that are in the market, require investment to maintain their share, however, they have little chance of going up.
They are products with a low participation rate and low growth. However, they generate enough cash to maintain.