Product Portfolio Analysis: Deciding What to Sell (and What to Ditch)

Imagine you're running a clothing store. You have tons of different items: t-shirts, jeans, dresses, shoes, accessories. But how do you know which ones are actually selling well and which ones are just taking up space? This is where product portfolio analysis comes in.

1. What is Product Portfolio Analysis?

Product portfolio analysis is a way for companies to analyze their entire product range and make strategic decisions about which products to invest in, which to maintain, and which to possibly discontinue. It's like a big picture view of your product offering, helping you understand what works and what doesn't.

2. Why is it Important?

• Focus and Efficiency: It helps companies avoid spreading themselves too thin. By prioritizing the best performing products, businesses can focus their resources on what truly matters.
• Growth and Innovation: Knowing which products are stars allows companies to invest in developing new products in similar categories or expanding their reach.
• Resource Allocation: By understanding which products are struggling, companies can reallocate resources (like marketing spend) to more successful items.
• Avoiding Dead Weight: Some products simply don't work out. Product portfolio analysis helps identify and remove these underperforming products, freeing up resources and improving overall profitability.

3. The Boston Consulting Group (BCG) Matrix

One of the most popular tools for product portfolio analysis is the BCG Matrix. It classifies products based on two key factors:

• Market Share: How much of the market does your product control compared to competitors?
• Market Growth Rate: How fast is the overall market for this type of product growing?

3.1. The Four Quadrants:

• Stars: High market share and high growth rate. These are the future leaders. Think about popular gaming consoles like the PS5 or Xbox Series X. They dominate their market and have lots of potential for further growth.
• Cash Cows: High market share and low growth rate. These are established products that generate steady profits. Think about established brands like Coca-Cola or Kleenex. They've already captured a significant market share and don't need much investment.
• Dogs: Low market share and low growth rate. These are products that are struggling and may need to be discontinued. This could include niche products or those that have lost their relevance in the market.
• Question Marks (or Problem Children): Low market share and high growth rate. These products have potential but need significant investments to grow. Think about new startups or niche products that are trying to break into a growing market.

4. Using the BCG Matrix in Real Life

Let's go back to our clothing store example:

• Stars: Maybe your store has a line of trendy sustainable clothing that's really popular with younger customers. This would be a "Star" product.
• Cash Cows: Your classic denim line might be a "Cash Cow." It generates steady profits but isn't expected to grow much further.
• Dogs: You might have a line of outdated clothing styles that aren't selling well. These would be "Dogs."
• Question Marks: Maybe you've just launched a new line of ethically sourced shoes. This could be a "Question Mark" product because it has potential but needs more marketing and investment to establish itself.

5. Beyond the BCG Matrix

• GE Matrix: This matrix uses two axes: market attractiveness and business strength. It provides a more detailed analysis than the BCG Matrix.
• Product Life Cycle: This model analyzes the different stages of a product's life (introduction, growth, maturity, decline) to understand its potential and make informed decisions about its future.
• Competitive Analysis: This process involves analyzing your competitors' products and strategies to understand your market position and identify opportunities for improvement.

Remember, product portfolio analysis is a continuous process. Market conditions change, and companies need to adapt their product offerings accordingly. By regularly analyzing their portfolio, businesses can make informed decisions to ensure their success in the long run.