Brands may have a lot of ideas for new products, but they need to ensure that those products will contribute toward business goals to ensure a profitable return on investment. To do that, brands need to focus on strategic planning to optimize their portfolio of products; the below paragraphs outline how to do so.
Table of Contents:
- What is a product portfolio strategy?
- What are the benefits of implementing a product portfolio strategy?
- How to create a product portfolio strategy
- Execute your product portfolio strategy with quantilope
What is a product portfolio strategy?
A product portfolio strategy is what business leaders use to guide their new product development decision-making, and how they optimize existing product lines for the strongest market growth.
What are the benefits of implementing a product portfolio strategy?
By undergoing a product portfolio analysis, brands set themselves up for the greatest likelihood of success. During this analysis, brands comb through their existing product lines and tie them back to key metrics that indicate their performance - whether that’s related to revenue, the volume of units sold, etc. It’s through this process that they understand which products best align with customer needs, streamline their internal processes, and identify areas for new product innovation.
The below sections detail a bit more how brands can benefit from a product portfolio strategy:
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Align your products with your overall business strategy
A product portfolio strategy can help align product lines with business goals.
When crafting an optimized product portfolio, businesses will review the product performance of each specific product and all product lines they offer in their entire portfolio. This process identifies how much each product contributes to company growth, and whether that product or product line is a cash cow or a question mark (as defined by Boston Consulting Group’s growth-share matrix - more on that below).
Through this reviewal process, brands will identify a portfolio of products for prioritization, and phase out product categories that don’t align with or contribute toward their strategic business objectives. They’ll also ensure that the products offered are effective in reaching all segments of their target market, each having various customer needs.
Additionally, any kind of new product development process is grounded in a single strategy so that businesses are only introducing new products to the market that they know align with their optimized product portfolio. In many cases, brands may even discover that their current product portfolio is cohesive enough on its own, and introducing any new products will do more harm than good.
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Better resource allocation
A product portfolio strategy helps allocate internal and external resources to the most appropriate products for your target market.
By managing resource allocation, business units have a much more efficient internal workflow, no longer dedicating their time and budgets to underperforming product categories or to products that are in a non-lucrative lifecycle stage. Taking budget and resources away from product categories that don’t benefit the overarching corporate strategy adds resources to the categories that indeed do.
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Capture a greater market share
To increase market share, businesses need to identify areas of the market they currently don’t operate in, or, they have to tweak their existing offers to generate added value; the latter of which might involve understanding unmet customer needs. This is where product portfolio analyses come into play, providing businesses with data-supported metrics on which product categories to focus on and which elements of a product offering are most important to consumers, rather than leaving them to make a guess.
Using advanced research methodologies such as segmentation is a way for brands to have a deep understanding of their target market and how to address all their needs. Advanced research always highlights where the biggest growth opportunities lie.
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Shape future market focus
Speaking of growth opportunities, a product portfolio strategy is leveraged long after its initial creation to guide future innovations and product ideas.
For example, say a product portfolio analysis identified that your line of shampoos and conditioners was underperforming, but your lines of hand soaps and body washes are cash cows for your business. Knowing this, future product development should be focused on new hand soaps or body wash products (i.e. new scents, different consistencies, partnerships with these products, etc.) rather than trying to introduce new shampoo or conditioner products.
Or, say your analysis found that your target market doesn’t want to buy separate hair products, but would be interested in a two-in-one shampoo/conditioner product. Testing this new product through a conjoint or A/B test will help shape future market focus to ensure it fits into your optimized product portfolio.
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How to create a product portfolio strategy
Now knowing what a product portfolio strategy is and its benefits, the below steps outline how a brand can go about crafting its own company’s product portfolio for continued growth and success.
1. Understand your business goals and the current gap in product performance
There are endless opportunities to create new products or market existing ones, but they have to be right for your corporate strategy. Brands need to be intentional and strategic with the product decisions they put forth in the market. The first step is understanding where the business currently stands.
During this stage, bring key stakeholders into the conversation to ensure full transparency of business goals before moving forward with product decisions. All future business initiatives should in some way contribute to those overall business goals. Also in this stage, perform a product audit to create a list of products that are performing well, ones that have opportunities for improvement, and ones that don’t generate the expected return on investment.
2. Determine your ideal portfolio criteria
Using the list you created above, of products that perform well, need improvement, or no longer benefit your business, you are ready to determine your ideal portfolio criteria. This criterion will help guide product improvements or new product developments, ensuring the qualities of these products align with (you guessed it) the overall corporate strategy.
In this stage, establish a set of key performance indicators (KPIs) that all future product performance can be measured against. KPIs for your products might include the amount of revenue each product generates, the resource allocation required for each product line, or each specific product’s contribution to market share.
3. Create a product portfolio matrix
Next, it’s time to create a product portfolio matrix. A very popular one is Boston Consulting Group’s matrix, which organizes products into various quadrants based on their growth rate and market share. These four quadrants are known as ‘stars’ (high growth and high market share), ‘question marks’ (high growth rate but low market share), ‘cash cows’ (low growth rate but high market share), and ‘dogs’ (low growth rate and low market share).
Organizing your existing products into such a matrix allows you to visualize which products are performing well and which are struggling. This information guides future decision-making, whether that is to continue growing a ‘question mark’ product or to scrap a product classified as a ‘dog’ to use its resource allocation elsewhere.
Boston Consulting Group’s matrix is just one example of how to organize and visualize your products when building a product portfolio management strategy. Other models might adapt this standard x-y axis approach to fit their own KPIs for measurement.
4. Conduct a product portfolio analysis
Using the matrix you built with your business-specific KPIs as analysis credentials, it’s time to see where each product falls.
For example, if one of your KPIs is ‘generated revenue’, dive into the sales numbers behind each product line to plot their performance in your matrix. As a result, you’ll have your version of BCG’s ‘stars’, ‘question marks’, ‘cash cows’, and ‘dogs’ to use as a guide in developing your product roadmap for an effective product portfolio.
5. Develop your product roadmap
At this point, it’s time to start developing your optimized product roadmap!
Based on the analysis of your portfolio matrix and where each product lies, your brand is in a position to develop a plan for future business objectives. In this stage, you’ll identify which current products should have prioritization, and which new product innovations you’ll plan to develop as part of the roadmap for a certain timeframe.
This product roadmap will serve as a guiding template to base all product decision-making around.
6. Measure and iterate
Last but certainly not least, it’s important to measure the effectiveness of your portfolio planning. How do your product lines contribute to your identified criteria and KPIs for the business? Have you entered a new market as planned? Have your product innovations gone over well with your target market?
This is the stage to measure how your portfolio of products that you identified for your product roadmap is working for your business. If things are not going as planned, it might be time to go back to the strategic planning phase and iterate based on your learnings.
Ultimately, the main business objective for any brand is to optimize product offerings, streamline internal processes, and enjoy market growth. Your product portfolio strategy should be instrumental in getting you there.
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Execute your product portfolio strategy with quantilope
Create a winning product portfolio optimization strategy with quantilope’s Insights Automation Platform. quantilope offers a variety of advanced methodologies that get to the root of product performance - from TURF analysis, choice-based conjoint, price sensitivity meter, A/B testing, and more. Whatever it is you need to test among your products - be it innovation ideas, pricing structures, channels of reach, etc., quantilope has a tool to do so. All of quantilope’s analyses are available in real-time as well, allowing brands to quickly act on their initiatives or go back to the planning stage.
Get in touch to learn how you can optimize your product portfolio with quantilope:
