Product Portfolio Flashcards
Product portfolio
The complete range of products produced by a business, including product lines and individual products.
Also called a product mix
Product line
A group of products that are closely related to each other, and are viewed as a unit because of marketing, technical, or end-use considerations.
Product portfolio management strategy
Design, deployment, and management of multiple brands as a coordinated portfolio…
…that address the needs of diverse customers in a marketplace…
…and maximize return while minimizing risk.
Specifies the optimal portfolio of brands a company should maintain…
…for comprehensive market coverage with minimal overlap.
Product mix breadth
The variety and number of product lines offered by firm (product categories)
Product line depth
The number of items in a given product line. Satisfying customer sub-segments with different tastes and price sensitivities.
Product portfolio management: Inefficient portfolios
- A lot of FMCG and fashion companies haven been found to maintain large, inefficient portfolios
- Unilever
- Diageo
- Several companies have undergone a process of cutting down their portfolio for higher efficiencies
- Burberry
- Armani
- Coke
Managing the product portfolio
Understand:
- Visualization
- Financial contribution
- Strategic roles
Change:
- Line pruning
- Line extensions
Understanding the portfolio
Visualization
Understanding how the offering in entirety covers the market & relative to the competition.
Understanding the portfolio
Financial contribution of brands
Contribution to revenue, profit, margins, market share:
Top & bottom line:
- Revenue
- Volume
- Profit & profit margins
Market share:
- market share
- future growth
BCG growth matrix
Portfolio management framework for prioritizing business/brands by degree of profitability.
- ideally, the excess cash from cash cows is invested in question marks, so that they become stars
- stars ideally become cash cows once category growth slows down
Understanding the portfolio
Strategic brand roles
Focus brand:
- strong financial results
- future momentum
- strong consumer following
Fighter brand:
- low-value offering
Niche:
- very narrowly defined segment
Past champion:
- cash cows
Silver bullet:
- Establish/maintain the overall brand image
Entry point:
- Entry point to the brand
Upside of high-priced products in a portfolio
- Increase the sales of other products in the portfolio
- To communicate expertise and brand prestige
- Publicity –> Supreme Brick & Supreme Oreo
Asymmetric dominance (decoy effect)
The decoy effect is defined as the phenomenon whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated”.
Anchoring (compromise effect)
Consumers are more likely to choose the middle option of a selection set rather than the extreme options.
Portfolio change:
Line pruning
Discontinue or revitalize underperforming products, to increase efficiency & avoid cannibalization.
- Pruning the portfolio & restructuring takes time to succeed (if at all)
Portfolio change: Line filling
Extensions
Add new products to cover market gaps, and achieve full coverage.
- A brand extension is when a firm uses an established brand name to introduce a new product
- A brand that creates an extension is called a parent brand
- or family brand if already associated with several products
Extensions types
Line extension
Line extension:
- transfers the existing brand name to a new product within the same product line
- Horizontal:
- same quality level
- accommodate different tastes
- Vertical:
- downmarket
- upmarket
Extension types
Category extension
Transferring of a brand name to a new product or service outside of the original product category
Extension types
Customer extension
Using existing brand on new products or services sold to a different customer segment.
Extension types
Channel extension
Expand to a different distribution channel, e.g. luxury channel to mainstream
Where to extend?
Determine where the brand can add value
- Associations - which are leverageable?
- Existing brand associations and brand identity
- What do people associate with your brand?
- Identify product categories for which there would be a fit
-
Evaluate the category in terms of business attractiveness
- Are there unmet needs?
- What is the competitive landscape?
- Entry barriers?
- The extension concept: positioning
- Differentiated offering
- Testing the new concept
Determining optimal value proposition
Brand architecture system
Branded house:
- One brand creates a single powerful image, sometimes with a descriptor
Sub-brands:
- Combining the corporate brand with strong sub-brands
- Sub-brands help differentiate and boost corporate brand
Endorsed brand:
- Leading with a strong sub-brand but leveraging corporate brands as endorser
House of brands:
- Decentralized companies targeting diverse markets
Establishing the need for a new brand
Conditions that would justify the need for a new brand:
- All existing brands have associations that are incompatible with the new offering
- Offering would damage the brand name
- New brand name is needed to create and own an association
- Only a new name would signal the newness of the offering
- A channel conflict requires a separate name
- The business is of sufficient size and longevity to justify investing in a new brand
