Product Portfolio is the range of products a company has in development or available for consumers at any one time.
This includes all the product items that a particular seller offers for sale.
For instance, Apple sells electronic products such as has product lines such as computers, mobile phones, music players, entertainment services, etc.
Composition of Product Portfolio
Businesses, especially large firms, tend to sell many related products in different varieties in order to cater to large customer base, increase sales revenue and maximize profits.
Let’s look at the overall composition of Product Portfolio of a typical business.
Product Mix (Product Portfolio) describes the combination of all the product ranges and items that a particular company offers for sale within each product line. Or, the range of products a company has available for consumers at any time.
The Product Mix of a business includes both Product Lines and Product Ranges:
A. Product Line: It describes the varieties of a particular product with the same characteristics that serve the same purpose in a particular market. For example, all the different types of computers sold by Apple such as MacBook Air, MacBook Pro, iMac, Mac mini, Mac Studio and Mac Pro. Remember that too much diversification can cause loss of focus. Maybe a subsidiary or affiliate can be used to improve the marketing of another product line.
B. Product Range: It describes the variety of different product lines that a business produces. Or, all the different types of products that the business mages. For example, Apple sells product lines of different products such as smart phones, laptop computers, tablets, watches, music players, earphones, etc.
For example, Apple’s product mix includes Mac, iPad, iPhone, Watch with many portfolios’ models such as iPhone 14, iPhone 14 Pro, iPhone 13, iPhone SE and iPhone 12.
Product Portfolio analysis
Knowledge about Product Life Cycle (PLC) is one of the main forms of Product Portfolio analysis.
Detailed analysis of Product Portfolio by marketing managers helps to make more accurate decisions about launching, growing, harvesting and withdrawing products. Being aware of the product life-cycle principles can help business managers to deal with the issue of product management.
This is crucial marketing knowledge to know when to launch new products, when to update existing products and when to end the product’s life. When done right, it can give a business competitive advantage over rival businesses.
Focusing only on selling successful products without launching new ones when other businesses are introducing attractive new products or revamped current ones is very common marketing mistake.
Let’s take a look how to effectively manage Product Portfolio.
Managing Product Portfolio
Managing product portfolio effectively is important for a business for several reasons.
1. MARKETING OBJECTIVES: Managing Product Portfolio effectively helps a business organization to achieve its pre-established marketing objectives.
2. SALES: Various products should be developed, launched and managed properly to help the business increase sales revenue. When sales of one product decline, other products should be developed and introduced to the market to take its place.
3. PROFITABILITY: As the profit from a product varies as it moves through its life cycle, products should be developed, marketed and managed properly to help the company appropriate levels of profitability. Profit is so vital to business growth and prosperity in the long-term as it contributes toward creating shareholder value.
4. CASH FLOW: Diversified Product Portfolio helps the firm to maintain important levels of cash flows. Selling only one product to a single market could heavily limit the revenues of the business.
5. PRODUCTION CAPACITY: Capacity of the factory should be kept at fairly constant levels because declining output of some goods which are becoming less and less popular will be replaced by increasing output for the recently introduced products. The business should be able to switch between producing different products depending on shrinking and growing demand for different products.
Ideal Product Portfolio is balanced
Various products should be developed, launched and managed properly to help the business increase sales revenue and profitability. When one product declines, other products should be developed and introduced to the market to take its place. This helps to spread risks because negative sales for one product may be offset by positive sales of other products in Product Portfolio.
Cash Flow should be reasonably balanced between different products. Cash from products with the positive cash flows (the successful ones) can be used to finance the products with negative cash flows (the new ones or declining ones). Selling only one product can significantly limit the sales revenues of the business.
The truth is that highly successful businesses have Product Portfolios of many different products with different market growth rates and different rates of market share.
Remember that balances product range is the key factor for running successful marketing operations.
