How to plan product portfolio strategy for marketing promotion?

Product portfolio strategy is a strategy for enterprises to make the best combination of the various products they produce and operate in order to face the market. How to apply product portfolio strategy in market layout? Below, the author will give you an analysis and introduction.

Product portfolio strategy:

It is a strategy for enterprises to make the best combination of the various products they produce and operate in order to face the market. The product portfolio strategy ensures that the breadth, depth and relevance of the product portfolio are in the optimal structure to enhance the company's competitiveness and achieve the best economic benefits.

Purpose of using strategy:

1. Expand the breadth of the product portfolio and increase the production of different varieties and types of products by utilizing the company's existing equipment.
2. Develop the depth of product portfolio to meet the market's different requirements for similar products and increase market share.
3. Strengthen the relevance of products, reduce costs and improve quality for the company, minimize the breadth and depth of the product portfolio, and concentrate on producing a few products.

[Relevance + Depth] Kraft Foods

Kraft Foods is the world's second largest food company, operating in 145 countries around the world. Kraft's four core product lines are coffee, confectionery, dairy products and beverages . Kraft operates in more than 70 countries and its products are sold in 150 countries around the world. In 2015, Kraft and Heinz merged to form the Kraft Heinz Company, the world's fifth largest food and beverage company.

Kraft's famous product lines (partial)

Kraft's brand logo

It is not difficult to see from Kraft's main product portfolio that Kraft is deeply involved in the food and beverage industry and has achieved the strategic goal of having strong relevance and in-depth exploration of similar products in its product portfolio. In fact, before 2004, Kraft owned 11 brands, but Kraft sold some brands between 2004 and 2007, including the well-known "Wrigley". Kraft's series of product portfolio reduction strategies were later proved to be correct decisions.

Kraft's core product is biscuits. The company has segmented the biscuit market based on attributes such as filling/non-filling and sweet/salty to meet customers' various needs for biscuits, a single food product. Kraft uses the strategy of reducing its product portfolio, concentrating resources and technical strength to improve the quality of its biscuit products and increase the popularity of its product trademarks; it also specializes production and operations, improves production efficiency, and reduces production costs. At the same time, Kraft acquired Danone's biscuit business, bringing Danone's competitive brands into its pocket. Recently, Kraft merged with Heinz and brought its products under the same umbrella, expanding the brand's market share in the food industry. This is the product portfolio expansion strategy adopted by Kraft.

In summary: Kraft's product portfolio strategy enables it to save costs and improve asset utilization; it continues to successfully enhance brand value and has achieved absolute dominance in the biscuit market with a rich portfolio of similar products.

【Breadth + Depth】Procter & Gamble and Unilever

Procter & Gamble

It operates in approximately 70 countries and regions around the world. P&G's 65 leading brands are sold in more than 180 countries and regions, serving 5 billion consumers around the world every day. Procter & Gamble's vision is to become and be recognized as a company that provides world-class consumer products and services.

P&G's fields of involvement (partial)

P&G brand logo

Through the analysis of its brands, it can be seen that Procter & Gamble covers at least 7 major categories of consumer goods, and its product portfolio has a certain breadth. However, these fast-moving consumer goods are concentrated in the daily chemical category, with cleaning products as the main business line. Therefore, P&G's product portfolio has also achieved a certain depth vertically. Taking shampoo as an example, the five brands cover people of different age groups and consumption levels, and their main selling points complement each other to avoid internal competition. This high/low-end product portfolio strategy enables the company to quickly seek new market opportunities and reduces the risk of using a single product portfolio strategy. Therefore, it has also been extended to other business lines of P&G.

Apart from food, most of P&G's products are targeted at female consumers. It can be said that P&G is a feminine furniture brand. This makes each business line intrinsically related. Starting from washing and care products and extending to cleaning products, cosmetics, perfumes, maternity and baby products, P&G has expanded its product portfolio in the washing and care daily chemical business, reduced the impact of market demand volatility, and dispersed market risks.

Unilever Group

It was formed in 1929 by the merger of the Dutch Margarine Unie margarine company and the British Lever Brothers soap company. Unilever products are used by two billion people every day and 400 Unilever brands are sold in 190 countries around the world.

Unilever products (partial)

Unilever brand logo

The three major areas defined by Unilever's official website are: food and beverages, personal care, and home care, which can also be summarized into the two major areas of food and daily chemicals. Compared with P&G, Unilever, another global daily chemical giant, has obviously invested more in the food sector (P&G has sold its food line and only has Pringles). Unilever is good at entering new markets and acquiring brands, and does not emphasize the "Unilever" brand, allowing its products to operate independently and appear as independent brands. Just like we eat a lot of Wall's, but many people don't know that Unilever also has an ice cream business line. Although this strategy of expanding the product portfolio does not fully utilize the company's reputation and trademark awareness, it reduces the extent of losses when the brand encounters market fluctuations or negative impacts.

After summarizing the above cases, we will find that product portfolio strategies can be divided into

• Expanding product portfolio strategy
• Reduced product portfolio strategy
• High-end product strategy
• Low-end product strategy

Kraft, Procter & Gamble, and Unilever all use multiple combination strategies at the same time to optimize existing products and develop new products in a market-oriented manner. All three companies make decisions on the width, length, depth and relevance of their product portfolios based on market demand, competitive situation and the companies' own capabilities.

Width: refers to the number of business lines. Taking the above example, P&G's width is 9.

Length: that is, the number of brands included in a business line. P&G's shampoo business line includes 5 brands.

Depth: refers to the product categories included under a brand. There are 6 series of categories under the P&G Pantene brand.

Relevance: Also known as viscosity, P&G’s end use and distribution channels are closely related.

Extra Chapter - The Industrial Layout of the "Family" with the Same Roots

[Adidas's brother is not Nike] Adidas & PUMA

Adolf Dassler, the founder of adidas, and Rudolf Dassler, the founder of Puma, are brothers.

The elder brother Rudolf is two years older than his younger brother Adolf. In 1924, the two brothers founded the Dassler Shoe Factory, with the elder brother in charge of sales and the younger brother in charge of research and development.

In 1948, after the end of World War II, Adolf Dassler changed the company name to adidas using the combination of his own name Adi and das. Rudolf started his own business and established the Rudy Shoe Factory (soon renamed PUMA) under his own name.

Made into a movie

Current Adidas and PUMA:

With the death of Horst Dassler in 1985, the Adidas brand began to waver. The following year, PUMA transformed into a joint-stock company. In 1990, French entrepreneur Bernard Tapier bought a majority stake in Adidas for 243 million euros. A few years later, Adidas returned to German hands again. It is said that it was not until 2009 that the third generation of the Dassler brothers put aside the 60-year-long feud between the two families, and Frank, the grandson of Puma founder Rudolf, also joined Adidas.

【Tonglu Gang】Three Links and One Delivery

STO, ZTO, YTO, Yunda, these four companies, as well as Huitong, Tiantian and other express delivery companies, all have a common hometown: Tonglu County, Zhejiang.

In 1993, Nie Tengfei, a young man from Xiatang Village who worked in a printing and dyeing factory in Hangzhou, gave birth to Shentong Express.

In 1994, Nie Tengfei arranged for his wife Chen Xiaoying's brother Chen Dejun to take over Zhan Jisheng's Shanghai business. Zhan left STO and founded Tiantian Express.

In 1999, Nie Tengfei died in a car accident. His younger brother Nie Tengyun left STO and founded Yunda Express.

In 2000, Chen Dejun’s junior high school classmate Zhang Xiaojuan persuaded her husband Yu Weijiao, whose timber business was losing money, to start YTO Express.

In 2002, Lai Meisong, who grew up with Nie Tengfei and his wife, founded ZTO Express.

Tonglu Express Development Timeline

The joking saying "Children in Tonglu County know how to work in express delivery since they are born" fully illustrates the booming express delivery industry in the local area. However, it is said that the three express delivery companies and one delivery company operate independently and have not formed an alliance like the "Shanxi merchants" and "Huizhou merchants", and they basically have no exchanges with each other. "After leaving the mountains, they don't communicate with each other and do their own business."

Source: "The Tonglu Gang, the Underworld Express Delivery Company of "Three Links and One Delivery"" http://www.infzm.com/content/95932

The current three links and one delivery:

In May 2015, Alibaba’s Yunfeng Capital and Alibaba Ventures acquired a 20% stake in YTO.

In May 2018, Alibaba and Cainiao made a strategic investment in ZTO, acquiring approximately 10% of ZTO's equity for US$1.38 billion.

On March 11, 2019, STO Express issued an announcement stating that Alibaba will invest 4.66 billion yuan and become the company's second largest shareholder.

Summarize:

The decision-making power of family businesses is in the hands of a few people, which makes it easy to respond to market changes and make decisions quickly. And because of the high correlation of interests, family businesses are often more cohesive, with high levels of obedience and trust. After the Dassler brothers separated, PUMA's initial quality was not good, but it still sold well thanks to Dassler's fame. What was dramatic was that when PUMA had quality problems, consumers would take their shoes to Adidas stores to return them. It turns out that family businesses have similar labels because of the identity of their managers.

Although the three express companies, STO Express, YTO Express and ZTO Express are not strictly family-owned businesses, the label that they are from Tonglu County draws a dividing line between them and companies like SF Express and EMS. In China, there are many industries like express delivery in Tonglu County, which have obvious regional business characteristics, such as "Putian Shoes", "Suqian Flower Seeds", "Guangzhou Shoes", etc. Among them, there are well-known names such as "Zhangqiu Iron Pot", but there are also labels such as "Suqian Flower Seeds" that have been overused. Regardless of whether this label is good or bad, family businesses do have certain advantages in market competition and corporate development.

Family businesses have barriers that are difficult to break through from the outside world. It is difficult for fresh blood to enter the business, and the business's "metabolism" is also very slow. Internal relationships are complex and conflicts are difficult to resolve. One careless move could cause the entire business to fall apart. The 60-year feud between the Dassler brothers is a typical example. If the two brothers had not fallen out, perhaps Adidas would now dominate the sports shoe market.

Related reading:

1. For marketing promotion, how should the market be segmented to be effective?

2. Marketing promotion: How does fission marketing achieve market “fission”?

Author: No Question West East

Source: No Question West East