Product Portfolio - Meaning, Importance, Factors & Example
Published in Marketing and Strategy Terms category by MBA Skool Team
What is Product Portfolio?
Product Portfolio is the entire list of all the products, services, brands, sub-brands that are sold or offered by a company at different price points to its potential customers in a single or multiple geographies. The total collection of the products that a company has to offer forms its product portfolio. Now these products vary in reference to the contribution they make to a company’s profits.
Some products cost more to produce, some have huge investments and less returns, some have a high growth prospect, some have greater advertising expenses etc. Product portfolio for many companies may comprise of similar products in a similar category.
Let us say mobile phones, there may be a company which has a diverse portfolio of phones but there may be a company which has a diversified portfolio comprising of not only phones but also communication equipment, data storage, computers etc.
Many companies sell 1 or 2 products but there are many companies which sell a plethora of products and services. This is mainly done to diversify or to target the larger potential customer population making sure to meet a large number of needs and wants. Having a strong portfolio may help the companies to withstand seasonality, recession and changes in consumer behavior. The companies these are trying to offer a lot of products and services which a customer might need in the process journey.
Companies are becoming more global and more broader in terms of problem statements they solve. Product portfolio with related or totally different products sometimes prove very critical for a company becoming a global giant or a conglomerate.
But owning a large portfolio could lead to lesser revenues, if the funds are not allocated properly to each individual product.
Boston consulting group has formed a unique BCG matrix to analyze these different products, based on two factors:
These Factors are:
a. Market share
What is the total share of the product? Is it high or low?
b. Market growth
Does the market have some growth? What was its CAGR? What is the predicted growth rate for next 5-10 years? Market growth is an important parameter for managing portfolio.
Are the no. of customers increasing with time?
Product Classifications are:
The products that have high growth and also, a high market share are known as stars.
These require a huge initial investment. They also require investment to sustain growth. If their growth slows down, they become Cash cows, the market share remaining high.
b. Cash cows
The products that have reached their maturity stage and require very less investment to maintain their market share, are known as the Cash cows. The cash cows constantly supply money, which can be used by the company for its stars.
c. Question marks
These are the products that have low market share, but have a high growth rate. A company needs to decide which question marks to invest in and which to not. Question marks generally require some investment to increase their market share.
The products which have low market share and also low growth rate are known as dogs. These products might reach the break-even but investing in them does not really help. A company may just stop their production.
The Boston matrix is constructed by making the following assumptions:
a.Market share can be increased by investing in advertising/marketing the product.
b.The gain in market share generates cash surplus.
c.In a product cycle, the market share generates cash surpluses when the product is in the maturity stage.
d.Growth phase is the best stage to build a product’s position in the market.
Product Portfolio Examples
The Coca Cola Company has Cola (Original, Diet, Zero), Sprite, Fanta, Minute Maid, Kinley and Smartwater as few of the well known brands in its product portfolio.
Another Example is Apple. Apple has iPhone, iPad, Mac, iPod in its portfolio. Even the individual brands act as umbrella brands and have multiple products in the portfolio like in iPhone there are iPhone X, iPhone 12, iPhone SE.
P&G has a very diversified list of products like Ariel, Gillette, Pampers, Pantene, Tide, Duracell, Olay which are spread across different categories, price points, customer demographics etc. Another example is Unilever which also has a similar product portfolio.
Hence, this concludes the definition of Product Portfolio along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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