4.9 - Product - Portfolio
The concept of product portfolio
A product portfolio, also known as a product mix, refers to the complete range of products that a business offers to the market at any given time.
Changes in product portfolios over time
Product portfolios are not static and evolve as market conditions shift.
- Old products may see a decline in sales and eventually be phased out or replaced with newer options.
- Existing products can be updated or extended, such as through new features or variations.
- Businesses must regularly assess their portfolio to ensure it aligns with customer demands and market trends, making adjustments like introducing innovations or discontinuing underperformers.
The Boston matrix and its categories
The Boston matrix is a strategic tool represented as a 2×2 grid that evaluates products based on two key factors: their market share and the growth potential of the market they operate in.
Categories in the Boston matrix
Products are classified into four distinct groups, each requiring different management strategies.
| Category | Market share | Market growth | Description |
|---|---|---|---|
| Stars | High | High | Profitable products with strong sales and room for expansion. They often require investment to maintain dominance. |
| Cash cows | High | Low | Established products that provide reliable income with minimal growth prospects. They generate funds for other areas. |
| Question marks | Low | High | Products in promising markets but with limited share. Targeted marketing could turn them into stars, or they may fail. |
| Dogs | Low | Low | Declining products with little market presence and no future potential. These are often candidates for removal. |
Managing the product portfolio using the Boston matrix
The Boston matrix guides businesses in balancing their product range to support long-term success. By analysing products through this framework, firms can make informed decisions about where to focus efforts and resources.
Strategies for achieving the right product balance
- Increasing stars and cash cows - Businesses should prioritise developing more of these high-performing products to drive growth and stability, while minimising the number of dogs that drain resources without returns.
- Investing income from cash cows - Profits from these reliable products can be redirected into research and development for new items, helping to refresh the portfolio and create future stars.
- Reviewing and adapting - Regular use of the matrix ensures timely changes, such as boosting marketing for question marks or discontinuing dogs, to keep the overall portfolio healthy and competitive.
The importance of the marketing mix in product development
The marketing mix, consisting of product, price, place, and promotion, is essential for businesses regardless of size, as it influences how effectively products are positioned in the market. Neglecting any element can lead to weaker performance against rivals.
Reasons large businesses invest heavily in product development
- Access to resources - They have greater financial and human resources to fund extensive research and innovation.
- Potential for high rewards - Discovering new products or materials can yield significant profits, market leadership, and competitive advantages over smaller players.