Product Portfolio Management

 For most marketing managers, a product portfolio strategy is an important part of building a consistent marketing plan. While it might seem that the product portfolio merely exists to demonstrate the effectiveness of a product or service, this is not really the case. Instead, this strategic tool is used to help identify promising opportunities for growth in terms of profitability and, ultimately, to help determine which future products should be developed, whether by the company or a third party.

First, marketing leaders must develop a robust product portfolio strategy, which combines competitive, customer, and technical analyses in ways that leverage the company s branding strategy in a manner that supports the organization s future product portfolio. The product portfolio analysis must take into account the competing brands in the target market as well as the industry sub-sectors within the target market. This analysis must be a continual process as competitors change their strategies and new products become available. The product portfolio management team should rotate among these various areas of analysis on a regular basis to help ensure that the firm remains focused on and is capable of responding to new product developments.

Second, marketing managers need to use the data from the product portfolio strategy and the product analysis to generate new product ideas that will support the long-term business objectives of the organization. Many marketing firms develop products that ultimately are never sold because they either do not meet the firm's short or long-term sales objectives. While there may be good reasons for developing a product that might not be relevant in the next five years (for example, some customers may want a product that delivers a similar experience to that which they already have), the manager must make sure that the product strategy is aligned with overall company goals. Otherwise, the new product ideas will simply be a waste of time and money.

Marketing services also play an important role in establishing the value of the portfolio. One way that this can be done is through building an image of the brand by creating an image that is consistent with what the firm represents. It is this consistent image - not the product portfolio strategy itself - that will create the brand loyalty that will drive the sales. Additionally, the marketing services provided by the firm must align with other key strategic priorities of the corporation. For example, if some of the firm's short-term goals are to increase customer loyalty, then marketing services that include customer care, after-sales service, and support for the firm's other marketing functions may be the right choice. The marketing services should also support the firm's long-term vision, which will help the firm meet its long-term competitive challenges.

The final component of a product portfolio strategy is to evaluate the marketing performance of the firm during the period under consideration. While it is usually not feasible to conduct an evaluation of the marketing activities of a firm at every point of time, several indicators may be used to detect trends and performance trends. These include market share gains, sales growth, price/earnings ratio, and return on equity. However, these indicators should be part of a strategy that is integrated across different functional departments. The evaluation should also be conducted over time, as companies tend to change their marketing strategies over time. Therefore, the marketing performance of the firm should be evaluated periodically as well.

Lastly, firm managers should consider the impact that various marketing activities will have on overall organizational performance. This can be accomplished by looking at the effect on sales, profitability, and the firm's overall operations. Although sales and profitability will generally affect overall performance, they are more likely to do so in the short term. Therefore, it is usually best to evaluate marketing activities against one another rather than against the overall product strategy. Also, a company's ability to generate new product ideas will impact future profits and will affect the firm's ability to compete in the market.

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