An ascendant philosophy in the area of product development and marketing goes like this: focus on a few products but do them better than anyone else; fire your least profitable customers and shower love on the money makers; choose carefully distribution partners who will add value rather than merely add outlets.
In other words less is more, focus is foremost.
But Harvard Business School professor Bharat N. Anand believes that in today’s world limiting your bets is also limiting your chances of success. He argues that product breadth matters, and you should consider a portfolio approach to product development and management.
Many markets suffer from a consumer-confusing proliferation of products, the paradox of choice, as author Barry Schwartz terms it. Meanwhile, the cost of reproducing and distributing certain classes of products — music and newspapers, let’s say — has dropped dramatically.
The result of these trends for product creators such as yourself is that it’s harder than ever to get your product noticed and to make a profit. The answer? Take more chances Anand says.
It’s tempting for companies to try to meet the twin challenges of getting noticed and getting paid by shedding product lines, but successful firms have shown that the best approach is often the opposite one: to expand and extend the product portfolio.
The benefits of a product portfolio approach include:
- Marketing flexibility: the ability to use one of your products as a loss leader to perk interest in the rest of the line.
- Market leverage: Use the interest generated by one of your hits to create similar products or boost sales of existing ones.
- Profit protection: A product portfolio allows you to move resources into more profitable areas even as profit drops in others.
You already know one of the best examples of a product portfolio strategy: the iPod. Apple’s huge success with the original iPod allowed it to create new versions for different markets and price points. The iTunes service, probably a loss leader for Apple, sold tons more iPods. The iPod underwrote creation of Apple retail stores, now huge money makers. Now comes the iPhone. Equally good news for Apple is that its iStuff has generated tremendous interest back in the flagship Mac computer family.
Broad brush or narrow niche? For more support for the focus, focus, focus approach see When Product Variety Backfires
What’s your experience tell you? Is it better to slug it out with your competitors on a product-by-product basis, or to use a portfolio of products to maneuver through the viscistitudes of the market?
(Pickle image by What Rhymes With Nicole, CC 2.0)
