Product Portfolio (definition and characteristics)

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

Many companies manage their marketing by product portfolios, the elements that make up the portfolios of the company are known as business units.

For any company it is important to manage in detail a constant analysis of its product portfolio, in order to choose the pertinent corrective measures. Always bearing in mind that the decision to remove from the market a product that is not profitable for the company is not an easy decision, a series of factors must be considered external, even internal that lead to the lack of viability of said product, in order to find alternatives that improve 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 made up of one or more product lines.

Considering that a product line It 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 conducting 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 measurement that is made taking into account the number of the different lines that make up the portfolio of products 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: It considers the degree of similarity between the lines, based on the frequency of their use by consumers, the production method, channels used for distribution and price, etc.

It is worth noting that a product portfolio that has a good breadth and depth allows the company a better adaptation to the market, depending on the specific needs of its segment definite.

The company uses in marketing, to determine what its product portfolio should be, the mix 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, you must first carry out strategic planning, that is, take a process that develops and maintains the correlation between the company's objectives and its capabilities, without wasting 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 for which is clear, is no longer the central purpose of the company since its inception. Hence the importance and relevance of the product portfolio and the different lines that compose it, since they try to get the broad environment and guidance for the company, market-oriented in terms of the needs of the consumers.

Product portfolio delineation

It takes place in two stages:

Analysis of the current portfolio

This analysis aims to support decision-making, it is convenient to check aspects such as:

• Product design and possible improvements.
• Manufacturing methods, measuring the advance or obsolescence of the methods used in production.
• Security offered to users.
• Management development, which is important since those who are in charge of administrative management make important decisions that could reduce the profitability offered by the products.
• Performance of the commercial team.

This analysis will allow us to consider which products are most likely, how important it is maintain, decrease or increase investment in these products to keep them in the portfolio of the business. Evaluating its projection based on the analysis of strategic elements according to the attractiveness of the market and its strengths within said market.

Growth matrix

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

Star products

They are those products that enjoy high growth and a high market share. In general, they are products that are being launched on the market for the first time, with a large investment and promotions to attract customers.

ProductsQuestions

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

Cash generators

They are products with a high market share, with a low growth projection. They are products that are on the market, they require investment to maintain their quota, 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 support themselves.