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Topic: Strategy

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A Diverse Product Portfolio: Worth The Effort?

Posted by public on 125 Points
Hi. From what I understand, most small businesses and even a lot of large businesses place a reliance on specialisation or focus, as it relates to their product offerings. For instance, you find firms making tools, or toys. It would appear that specialisation could be seen, or is a principle by which many firms do financially well.

Of course, sometimes somone has one great product idea and make their fortunes by licensing or manufacturing that one product. Perhaps an example of this is Ron Hickman and his workmate invention.

Okay, but what about anticipating a firm producing a diverse product range. Where there is no common theme, product type or idea that links them (apart from being innovative and "simple" products? Basically, is it a sensible or effective application of effort to build up a firm, where the intention is to offer a diverse product range? Say where the product range amounts to, a toy, a tool, a can opener, a lock, a doorbell system, a storage box, etc, etc.

Are there any examples of firms (apart from design houses)that do offer such a diverse range of products? Thanks.

  • Posted by mgoodman on Moderator
    The problem with having a portfolio such as you describe, all under the same company umbrella, is that you miss an opportunity to communicate clear benefits to specific target audiences. You will have many different target audiences, each with its own needs, and they would be confused if they thought the company that made their toothpaste also made automobile tires, as an extreme example.

    If each product category had its own distinctive brand name(s) you could collect them all under a corporate umbrella name (e.g., ABC Enterprises) -- but then you probably wouldn't want to advertise the corporate name because it wouldn't mean anything to your prospective customers, distributors or business partners. If that's the case, then the corporate name is merely for your convenience, not requiring any sort of imagery or brand recognition.

    For smaller companies, the marketing challenge is usually to get broad recognition among the target audience, and they fantasize that having a recognizable corporate name in one category will somehow "rub off" on other categories and thus reduce their overall marketing costs. (That rarely works, of course.)

    Procter & Gamble is a good example of a company that operates in a diverse set of markets -- with Pampers, Tide, Ivory, Bounce, Bounty, Charmin, Dawn, Always, Gillette, Olay, Vicks, Tampax, Clairol and dozens of others -- and yet has a single corporate name. They actively market each brand on its own merits, and you have to read the fine print on packaging to find out that they are all made and distributed by Procter & Gamble. (If you have deep pockets and superb marketing skills, this approach might work for you.)
  • Posted by srserie on Accepted
    I agree with mgoodman. Marketing is specializing into many different target audiences, each with its own needs. And the internet is becoming (or has become already) a key piece to any business marketing strategy.

    I have found a company that helps me use the internet to serve my target market: Helping businesses use the internet to get more customers. These are both online and offline businesses (e.g., brick and mortar).

    If you are looking to either find your target market or help others find theirs, then this company could be an option for you. It teaches how to use Attraction Marketing techniques to find and serve your target market using the internet. One of the key parts of the training is showing you how to Brand Your Company or Yourself. Key to any marketing strategy.

    I put together a review of this company for you (or others) to read and help you with your question. Here's the URL if want to take a peek.

    [URL deleted by moderator]

    P.S. Please let me know if this has been of use to you. Thanks
  • Posted by Peter (henna gaijin) on Member
    To see examples of companies with a diverse portfolio that don't seem to have a connection, just search for companies that are conglomerates. GE is one of the more well known examples.

    On the whole, companies that sell products that have some sort of synergy would seem to do better. A key marketing synergy is that the product would go through the same channels. So if you are already selling toys, adding other products that would also sell to the same channels would be easier to add than a product which goes through much different channels.

    Another marketing add on would be vertical integration - using your toy company example, buying a toy wholesaler or retailer would be vertical integration.

    You could also add complementary products. Car manufacturers getting into finance is an example of this.

    Keep in mind that some companies have products that seem different and don't seem to have synergies that us marketing folks see, but really do have synergies. I worked for one company that sold heat shrink tubing, high tech wires and cables, pipeline corrosion protection, pipeline leak detection, electric snow melting mats, and resettable fuses (among other things). They went to different markets and on first blush, would not seem to be connected. But in their case, each was using a technology they invented. This company, Raychem, was the inventor of heat shrink tubings, which used a cross-linked polymer. This cross-linked polymer was then expanded to all these other uses. So the synergy is that they can make all of these from the same manufacturing plant. Materials companies, like DOW chemicals likely follow the same.
  • Posted by dubois on Accepted
    Think in terms of the 5 P's of marketing: Product (Peter's Raychem example), Promotion (Goodman's explanation of brands), Place (like auto + financing), Price (brands known for low-cost or premium goods but never both) and People (like leveraging your engineers' skills, or selling to one target market).

    I've advised tech startups on this issue. Their founders had more ideas than time or money, yet they found it painful to pick one idea and let go of the others.

    P&G brands share a target audience. GE's product groups all are energy related, and in each group they have many products.

    Your "Joe" wants to sell a variety of products and, if they share at least one of those P's, there could be a rationale for the diversity. But if it's a common child's toy, a professional power tool, an expensive can opener... then Joe will enjoy no market efficiencies.
  • Posted by public on Author
    Hi. Joe says thanks for ther responses.: -) Actually I like talking in terms of Joe, so I will continue that way.

    Joe can see key elements of marketing, such as identification of a target audience, also look like principles of success, and in a way tend to make the effort of self employment more financially rewarding. The theory being that issues such as target audience, branding, specialization, synergy, etc leads to, well, sales.

    Joe surmises that how much he takes into consideration these marketing issues, is down to the degree to which he seeks financial success.

    Joe thinks this:

    * A target market must be identified.
    * Branding is very helpful, but not essential.
    * It will be very helpful if there is some synergy.
    * It is of great help if he can get his products onto a retailers shelf.

    But as has been said, no branding, or the less synergy, there is then a sense of reducing "marketing efficiences". Or maybe that should be "marketing efficacy", I'm not sure. Clearly marketing activities helps.

    I suppose in a way you get the kind of financial sucess that you are willing to work for, meaning that the more you attend to things like branding and synergy etc, the more likely you are of achieving financial success.
  • Posted by public on Author
    I'll just say a few more things then award points.

    Joe surmises that if he really wants to do very well, he will basically need to brand. That probably means (in the typical case) making a product type. Such as tools, toys. Which is akin to specialization. In at least one product type.

    But Joe has not entirely done with considering starting up a firm that produces a diverse product range of simple products. Or perhaps finding a niche.
  • Posted by cookmarketing@gmail. on Accepted
    Absorb and listen to all the above...unless you have unlimited resources; your portfolio should address one vertical/silo until you become a destination supplier
  • Posted by telemoxie on Accepted
    A company which might be somewhat close to the manufacturer you describe might be a local organic farmer. They serve a convenient market, local folks, and they sell Friday of product (produce)
  • Posted by mgoodman on Moderator
    Just to set the record straight ...

    dubois wrote: "P&G brands share a target audience."

    While I agree with much of what dubois wrote, I don't agree that "P&G brands share a target audience." P&G is very careful in the way it segments a market so that its brands are quite independent of each other -- each providing a benefit unique to its target audience. For example:

    - Tampax customers are not likely to be Gillette customers, and vice versa.
    - Pampers is targeted at mothers of young babies. Always is increasingly targeting adult incontinence (diapers for seniors)
    - Etc.

    When the market(s) are similar demographically, the segmentation is likely on the benefit: Bounty is all about absorbency. Dawn is about grease-cutting and clean dishes (washed in the sink). Cascade is for those with dishwashers. Ivory soap is for babies' baths. Lava soap is for really dirty [adult] hands.

    To say that P&G brands "share a target audience" is quite misleading. It obviously depends on how you define "target audience."

    Early in my career I was Brand Manager on Mr. Clean and Lava soap (at the same point in time). We didn't for a moment think our brands had the same target audience. They may have had similar distribution channels, but not the same target audience. And other P&G brands -- like Crisco, Folger's, Jif, Crest and Scope, for example -- certainly didn't think they had the same target audience (as each other, or as Mr. Clean and/or Lava). And Olay and Gillette don't even have the same primary distribution channel as most of the brands mentioned above.


    *** Note: Many of the brands noted above are no longer owned by P&G. They are used as examples here because they were all P&G brands at one time, and most marketers are familiar with the brands and their respective Positioning(s). ***
  • Posted by Peter (henna gaijin) on Accepted
    I think you/Joe might be mixing up the meaning of brand with product mix. In the original question and most answers, we have been taking about product mix and synergies.

    Whether you focus on creating a brand around these products is a whole different question. Branding (a verb) is trying to affect how people think of your company or products. A brand for any product offered will be created in a prospective customer's mind no matter what you do based on how they perceive the product and company. Companies can put effort into this to guide the brand perception to be something they want.

    Brand as a noun is often synonymous with product or product groups. It was mentioned above "P&G brands", they were talking about P&G product groups.

    Comments on your summaries:
    * A target market must be identified - absolutely. This needs to be done for every product they plan to produce, and is not necessarily the same even for 2 very similar products (example above of adult diapers versus diapers for babies - much different target markets).

    * It will be very helpful if there is some synergy - this only matters with a second or more product. It was mentioned before by Dubois about entrepreneurs having way more ideas than resources, and I have also found this to be quite true. It would have to be a very synergistic pairing before I would suggest taking on more than 1 product at first. Usually best to figure out which product has most likelihood of success and focus on that first. When that first product is up and running, then start looking at other possible products.

    * Branding is very helpful, but not essential. See above about banding the verb - a brand image will be made by prospective customers and customers, whether you perform branding activities or not.

    * It is of great help if he can get his products onto a retailers shelf. This depends on the "place" part of the 5Ps, but if it is a product's channel is to be sold through retailers, getting on shelves is usually a requirement (and a big challenge). Online retailers, like Amazon, are often relatively easy to get on, but rarely are you able to make a business out of that channel alone.

  • Posted by mgoodman on Accepted
    One element of the Marketing Mix has been notoriously absent in our remarks to Joe -- PRICING STRATEGY.

    If Joe wants to maximize profit, he will need to determine the pricing strategy that will allow him to zero-in on the price that will generate the greatest variable profit, considering unit volume, competitive environment, fixed and variable costs and longer-term values (like customer loyalty, competitive response, repeat purchase rate, etc.).

    This is one key reason that looking at total market gross sales is likely to misinform his decision. Without knowing the specifics of the product/category, it's hard to know what the ideal pricing strategy will be, and thus how profitable his offering is likely to be.

    A a tool he sells for $100 with 5% variable profit won't generate as much as a $50 toy with 15% variable profit. Of course, higher unit volume can make up for the difference in profit margin ... so Joe will need to make some assumptions about each of his products' price elasticity. (Hard to do if you don't even know what the products are!)
  • Posted by Shelley Ryan on Moderator
    Hi Everyone,

    I am closing this question since there hasn't been much recent activity.

    Thanks for participating!

    Shelley
    MarketingProfs

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