165 Reading: The Product Portfolio
Throughout this course, we have discussed a number of ways that organizations market products successfully. How does an organization decide which products to offer? When should a company add new products, and when should it discontinue existing ones? Product portfolio management answers these questions.
Organizing for Effective Product Marketing
Before we dive into the product portfolio it is important to understand how products are organized in most businesses.
Typically, organizations group like products into product lines, and then group lines of business targeting a common set of customers into something called strategic business units (SBUs).
A product line is a group of products marketed by an organization to one general market. The products have some characteristics, customers, and uses in common, and may also share technologies, distribution channels, prices, services, etc. There are often product lines within product lines.[1]
Before we take a look at an example, let’s review some definitions within product organizations:
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- A product is a bundle of attributes (features, functions, benefits, and uses) that a person receives in an exchange. In essence, the term “product” refers to anything offered by a firm to provide customer satisfaction—tangible or intangible. Thus, a product may be an idea (recycling), a physical good (a pair of jeans), a service (banking), or any combination of the three.
- An example of a product is Tylenol pain reliever.
- A product line is a group of products marketed by an organization to one general market. The products have some characteristics, customers, and/or uses in common, and may also share technologies, distribution channels, prices, services, etc. There are often product lines within product lines.
- An example of a product line is the full range of Tylenol products.
- A strategic business unit or SBU is a self-contained planning unit for which discrete business strategies can be developed.
- An example of a strategic business unit is consumer health care products.
- A product is a bundle of attributes (features, functions, benefits, and uses) that a person receives in an exchange. In essence, the term “product” refers to anything offered by a firm to provide customer satisfaction—tangible or intangible. Thus, a product may be an idea (recycling), a physical good (a pair of jeans), a service (banking), or any combination of the three.
Johnson & Johnson
Johnson & Johnson has hundreds of products. They sell baby shampoo to new parents and knee systems to surgeons who perform knee replacement surgeries. Imagine trying to understand all of the different products and their target buyers. It would be impossible to span all of those products well. A different organization owns Johnson & Johnson’s Aveeno face wash. It would be easy to optimize for a single product, rather than trying to achieve company objectives across all the products.
And as for a product line inside a p