Effective Portfolio Management During the Product Lifecycle

For every product that we buy at any time, there is a certain product lifecycle stage associated with it. Products, like everything in this world -alive and soulless have a certain lifecycle and are not eternal. This is the most important notion for a Product Manager. Especially when the PM is managing multiple products within his portfolio.

The product lifecycle is the process that each product is undergoing from the stage that is introduced to the market until its decline. Please see the below diagram.

At the top, you can see a trendline for sales and revenue for the duration of the lifecycle. For a Product Manager is very important to know every time where is he in terms of PLC to avoid common pitfalls, seize opportunities, and retire his products within his portfolio at the right time. But let’s see how a product is behaving throughout the curve. As we enter the market the demand for the product increases and the product becomes unavoidably popular among the consumers. This is the mature phase. Eventually, the demand will become lesser and the product and this is when we ender the decline phase. Knowing where we are currently is a major strategy itself as you can extend each phase as you like. For example, in the mature phase, where we have the biggest revenue, a PM can extend the phase by creating extra services accompanying the main product in order to increase the PLC and reach the product line extension instead of leaving the product to reach the last stage which is the decline phase.

Watch outs in every stage of PLF for a healthy portfolio

Introduction phase: During the intro phase your products will have high cost to produce and the actual length of this phase depends on the product itself. The stages that you undergo are internal communication, pre-launch activities, and external communication. The key strategies to expand are: awareness and education, advertising, promotion, and marketing campaigns, targeted campaigns at a specific audience, maximize publicity, monitor initial sales..

Growth phase: This is the phase that your customer base is growing as a result of the activities in first phase and as a result your revenue also. At the same time though, competition comes as they see that is a profitable market. What we need to optimize here is the margin we make with each additional customer. Some of these strategies that you can follow in this phase are: Control costs to increase profits as we scale, increase customer conversion rate, plan for response to competitors (changing product, price?)

Maturity: This is the top phase of your product in terms of sales etc. In this phase sales are high, and it is the most profitable phase. We have low market growth and low elasticity on the other hand though. Here, some of the key strategies are: maintain market share and extent this phase lifecycle as it is one of the most profitable. Monitor market for changes as competitors can lurk – an example is Nokia where they were thinking that is the most competitive company in the cell phone market and suddenly they were disrupted by apple, Samsung, and other major companies in the smartphone market.

Retire: the last phase which is unavoidable is to retire a product. And what I mean by unavoidable, that the value that your product offers and not necessarily your product will decline as fashion and technology changes. Then sales declines as well and the cost of support increases. Some of the key strategies that you can follow here are Porter’s decline strategies: Leadership, Niche, Harvest, Divest and the decision to withdraw depends on opportunity costs.

Tools to manage your products within your portfolio

Not all products that you introduce have a full lifecycle. It is the customers and their adoption that regulates the product lifecycle. Let’s see what I mean by the below graph from the Diffucion of Innovation be E Rogers

The innovators which are the lowest % are the people that care about new ideas, innovation etc. These people know the risk behind their purchase but are willing to take it. They buy the product just for the sake of IT or innovation. Usually, there is no major profit from these people.

early adopters are similar, with the difference that are more comfortable to buy and they are demanding.  These people drive the increase the sells. The pragmatists are similar to early adopters in sales as they continue the momentum but these people want results. If the product doesn’t deliver results they will not buy it (case with subscription models and repeated customers). These people are constantly contacting a cost/benefit analysis. These people usually copy the buying habits of their peers, that’s why we have this high curve as more and more people buy.

The conservatives are the most difficult market but because of the momentum that the product got from the previous phase and because there is no other choice, the conservatives start buying it. On the other hand, they have the opposite mentality from pragmatists as they don’t believe intangible benefits a lot and they care for additional services or focus on tangible benefits.

In the end, we have the laggards that in some way “they are obliged” to buy the product and they are very skeptical about the real benefits. An example is an old person who is buying a smartphone because everyone in his family has one. No real benefit for him, as he doesn’t know how to use it and not willing to learn but at the same time is a must have.

Boston Consulting Group Matrix (BCG)

The BCG helps is another tool that can help the Product Managers manage their products effectively within their portfolio. The BCG is comprised of 4 quadrants and by categorizing your products in each quadrant you can define the budget and effort you have to spend in every square.

As we can see, there are two axes – market share and growth rate. The star products are those who have high market share in a high market growth environment, the cow products are those with big market share with small market growth. This means that you are dominant in this market and usually these products are the most profitable.  The dog products are those with low market growth and ow market share – not very profitable as we understand and question arks are those with low market share but high market growth – there is always potential to grow but they need the extra push.

Combining BCG and PLC for effective portfolio management

In the above diagram, we can see 4 products within our portfolio. By combining the PLC and BCG you can understand when is the right time to introduce new products and retire others to have a healthy and balanced portfolio!

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