Product Portfolio (definition and characteristics)

Category: Business

The preference of companies in the market today, is to offer a multitude of products, thus raising their productive efficiency and diversifying risks.

Many companies manage their marketing through product portfolios , 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 said product, should be considered in order to find alternatives Better 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 certain 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

When carrying out an analysis of the company’s product portfolio, it is necessary to handle the following parameters, since they are used to know their main aspects and dimensions.

  • Amplitude: It is a measure that is taken taking into account the number of the different lines that make up the portfolio of products sold by the company.
  • 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 other 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 portfolio of products that has a good breadth and depth, allows the company a better adaptation to the market, depending on the specific needs of its defined segment.

The company uses in marketing, to determine how its product portfolio should be, the mixture of them and their different factors (aforementioned amplitude, length, depth and consistency).

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 said portfolio, strategic planning must first be carried out, that is, 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, this mission so that it is clear, 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, market-oriented in terms of the needs of consumers.

Product Portfolio

It is essential in two stages:

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.
  • 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.

Growth matrix

In order to measure growth and market share, the products are divided as follows:

Star products

They are those products that enjoy 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.

Questionable Products

They are products with low market share, but projects high growth. In general they are already in the market, but they require investment to maintain their quota and become a star product.

Cash generators

They are products with a high share of market share, with low growth projection. They are products that are in the market, require investment to maintain their share, however, they have little chance of going up.

Dog products

They are products with a low participation rate and low growth. However, they generate enough cash to stay.