What is a Product Portfolio and How to Build it?

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Product Portfolio

Definition of Product Portfolio

A product portfolio (also called a product mix) refers to the total collection of products or services that a company sells. It may simply be a single product or a series of products.

What Is a Product Portfolio?

What a company does or sells is what defines them. Products and services are at the center of commerce today. 

With growing competition and demand, everyone wants to enhance their product portfolio. However, do we clearly understand what a product portfolio is? 

Let’s begin by understanding what a product portfolio is and proceed to how you can build one! 

A product portfolio is the collection of all the services or products that a company offers. 

The product portfolio of a business includes the following types of products: 

  1. Products they offered during the foundation period. 
  2. Products they are currently selling. 
  3. Products that are in the pipeline. 

Now, many big enterprises segment their products into product lines or verticals. However, their product portfolio combines all their products and product lines. 

A product portfolio analysis helps you stay on top of the game and understand how to innovate. 

Thus, you need to have a product portfolio if you’re a company. And if you haven’t put yours together yet, now’s the time! 

What Should You Include in a Product Portfolio?

Well, the answer to this is straightforward. Your product portfolio should include all your products

Hear us out. Don’t make this challenging for yourself. Include them all, whether you have 10 product lines, five sub-brands, or four single products. 

The key is to organize and segregate your product portfolio accordingly. 

For example, suppose you’re a management software company. In that case, you have three product lines. 

One for product managers, which may include product management software like JIRA. Your second product line is for human resources. You perhaps offer various HRIS. And third, you provide automation services for CRM

To organize your product portfolio, begin broader and then narrow down. First organize by brand, then subsidiary, then perhaps the product lines, and finally the products under each. 

As mentioned before, your product portfolio must include all these products: 

  1. Products they offered during the foundation period. 
  2. Products they are currently selling. 
  3. Products that are in the pipeline. 

Later, we will learn how each product’s market share and growth play an essential role in your product portfolio. 

What Is the Importance of a Product Portfolio?

Before we get into how you can build your product portfolio, you must first understand why it is crucial. 

A solid product portfolio can help organizations adapt to seasonality, recession, and changing consumer preferences. 

Companies are attempting to provide a wide range of products and services that a consumer may require during the customer journey.

Companies are getting increasingly global and diverse in the problem statements they address. 

Product portfolios with linked or unrelated items can sometimes be significant for a company to become a worldwide powerhouse or conglomerate.

Here’s why a product portfolio is essential: 

  1. It optimizes product investments.
  2. It strengthens the product’s competitive standing, increasing its chances of being sold.
  3. It increases product focus. 
  4. It significantly improves collaboration and communication.
  5. A diverse product offering raises overall brand awareness.
  6. It becomes easier for businesses to introduce new or updated products.
  7. The product portfolio helps enterprises to expand globally.
  8. Creating a product portfolio allows a company to address the needs of several market segments.
  9. A product portfolio determines your IPO in the stock market. 
  10. As a product’s life cycle concludes, newer products may replace it.
  11. It helps identify weak and robust products, assisting in the transparency of resource allocation.
  12. It also aids in ensuring that product investments align with corporate objectives.

There’s no choice here. If you’re a company that sells or offers something, you must have your product portfolio. It’s a primary practice. 

Why Is It Important To Have a Balanced Product Portfolio?

Your product portfolio will contain all your products and their market share and revenue. 

However, when you analyze your portfolio, you may realize that some products are rewarding while others slow you down. 

This should give you a vital insight into your business. It is, thus, essential to have a balanced product portfolio. 

A balanced product portfolio ensures that your risks and assets are equally distributed. 

Moreover, having a balanced portfolio means that you can take advantage of the current and future market possibilities. In the absence of a balanced product portfolio, the market rules you instead of the other way round. 

A balanced product portfolio is an essential tool for change management

The Boston Matrix is a popular framework for balancing your product portfolio. We will briefly discuss it later in this article

How To Build a Product Portfolio?

Here’s the real deal. Let the action begin! 

When you start building your product portfolio, there are certain things you have to consider. 

The two critical components while building a product portfolio are: 

The market share of the product.

Here, you ask yourself what the total market share of the product is. Is the percentage high or low? 

The market growth of the product. 

Now, does the product have a growing market? What’s the growth rate of this market? You must identify whether your product’s market will grow or decline with time. 

Once you have data on these components, you can use the Boston Matrix to categorize your products into the following types:

  1. Stars 

Products with high growth and market share are stars

These demand a significant upfront investment. They also need investment to maintain development. 

If their growth slows down, they become cash cows with a significant market share.

  1. Cash Cows

Cash cows are products that reach maturity and require very little capital to preserve their market share. 

The cash cows consistently supply money, which the company can use to invest in its stars.

  1. Question Marks

These products have a small market share yet a rapid growth rate.

 A business must determine which question marks to invest in and which to avoid. To grow their market share, question marks typically require some investment.

Product analytics can help you understand the needs of your product for better investment decisions. 

Sometimes, stakeholders play an important role in ruling out the question marks. 

  1. Dogs

No offense to the adorable animal. They probably made the term out of frustration. 

Dogs are products that have a low market share and a poor growth rate. These products may reach their break-even point, but investing in them is ineffective. 

A business may simply call sunset on these products.

And with that, you can build and categorize your product portfolio!

Wait, what if you already have a product portfolio? In that case, you might want to know how you can optimize it. 

How To Optimize an Existing Product Portfolio?

You can expand on the Boston Matrix and optimize your existing product portfolio. 

Once you run a thorough product portfolio analysis, you may adopt one or more of the following product portfolio strategies: 

Hold 

You continue along the same path. You run business with the product in question in the same way to hold the status quo. 

Build

You want to develop further. Here, you may choose to invest more. You can either invest in a Question Mark and make it a Star. Or you may increase your investments in a Star. 

Product portfolio management helps to make such decisions. 

Harvest 

Here, you don’t make new investments but rather utilize incoming cash flow. You may decide to use the revenue from a Star and Cash Cow product to reduce investment burdens. 

Divest

Well, this is a tough call. 

You sell off or sunset Dogs to invest your human resources and financial capital in your Star and Question Mark products and divisions. 

You can track your products and see how your stakeholders feel about them with product management tools. 

What Are Some Examples of Product Portfolios?

Here are some examples of product portfolios that you may be familiar with: 

Apple

Apple’s product portfolio includes the iPhone, iPad, Mac, and iPod. Even individual brands serve as umbrella brands, with many portfolios’ models, such as the iPhone X, iPhone 12, and iPhone SE.

Proctor And Gamble

P&G provides a wide range of products such as Ariel, Gillette, Pampers, Pantene, Tide, Duracell, and Olay that span multiple categories, price points, and customer demographics. Unilever is another company with a comparable product portfolio.

Cola-Cola

Coca-Cola is another example. 

The Coca-Cola Company’s product portfolio includes well-known brands such as Cola (Original, Diet, Zero), Sprite, Fanta, Minute Maid, Kinley, and Smartwater.

Well, now you know everything you need. Start using Chisel for free today and optimize your product portfolio! 

FAQs

What Tools Can You Use for Managing Your Product Portfolio?

Some of the best tools to help you manage your product portfolio are Chisel, SmartSheet, and Monday.com. You can use Chisel free-forever starting today!

What Is Product Portfolio Analysis?

Product portfolio analysis is the process of helping the product development team evaluate the current product portfolio and infer the changes and investment decisions.

How Can a Business Expand Its Product Portfolio?

A business may expand its product portfolio through various strategies. These strategies include finding new markets, expanding distribution channels, analyzing product feedback, mergers, acquisitions, and launching new products.

Is Product Mix the Same as Product Portfolio?

Yes, ‘product mix’ is another term for a product portfolio.

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