Factfile 18
Defining portfolio marketing
Portfolio marketing is driven by a number of inter-related factors:
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the need to ensure that the product portfolio is capable of meeting those customer needs that one is capable of serving profitability;
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the ability to ?cross sell? and ?up sell? new services to existing customers; and
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profit maximisation.
It is therefore vital to understand:
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The profit/contribution made by each element of the portfolio.
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Product performance against key non-financial criteria ? for example quality of service and brand awareness.
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Product inter-relationships.
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The applications for which current products are used and any change to the patterns of product usage for these applications across the customer base.
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Competitor product propositions.
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Gaps in the product portfolio.
A thorough understanding of product contribution helps the portfolio marketer to develop distinct product plans for each product/product group and customer/customer group, based on value maximisation.
The broad strategic direction for subsequent plans should be:
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Value creating products
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Planning for growth, increased market share
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Value diluting products (ie conventional profit but not covering cost of capital)
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- plans to raise returns before growing by either reducing costs or pricing according to customer value delivered.
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Value destroying products (conventional loss)
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Aggressively attack costs, consider price rises or releasing capacity for other products
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Products with negative gross margin
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Cease to produce
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Two examples of this in practice: