Vectors of portfolio expansion

As brands mature, companies want to expand their product portfolios, sometimes to diversify and reduce risk and other times for chasing growth. Adding more products to a brand’s portfolio comes with management baggage. Most new products don’t make it big and the products that are added, often turn out to be too small to justify growth investments but are  too significant  to cut off since they added some vanity value to the top line. Strategic portfolio development focuses on leveraging existing capabilities, assets and resources while introducing new products carefully, thereby reducing incremental management overhead and increasing the chances of positive results from new products. In this post, we explore some of the approaches established brands can take to expand their product portfolio.

1. Expansion on the depth of need

All consumers of a solution aren’t alike. The base need for a solution may be same

among various consumers, but different consumers value different outcomes. For instance, the basic need for a ride-hailing service is to get from point A to point B comfortably and reliably. But some consumers may have multiple stops and hence they are dissatisfied with having to wait for a new vehicle multiple times in a trip and a day-hire works out better for them. Similarly, there are consumers who have point-to-point routes which are too short for any value add to really be experienced. They’d rather pay less for a basic service and be ready to compromise on privacy for the short duration. UberPOOL caters to these consumers. By offering on-demand, ride sharing and for-hire models, Uber is able to expand its portfolio and cater to consumers who need more (and less) of their service. 

2. Equity based expansion

Another great vector to leverage and expand a brand’s portfolio is using the brand’s equity in the right solution categories. Most established brands are unanimously recognized for certain distinguishing traits among consumers. It could be things like being innovative, trustworthy, experts etc. That means that consumers expect those brands to act in the way they imagine and will be highly receptive to their products which live up to that equity. Brands can leverage this to enter categories where their equity is likely to be valued. A great example is that of Nivea, whose cold cream sells on ‘softness’ and being ‘safe for delicate skin’. Nivea leveraged this equity and extended the brand into several categories such as body lotions, deodorants, and even after-shaves for men. They’ve captured  a small, yet significant share in all these categories successfully. 

3. Context based expansion

One classic yet underestimated approach to expand a portfolio, is to simply build on top of core value of your existing product and make it relevant or viable in places where it currently isn’t. Snack and beverages brands know this tactic well. The same Pepsi comes in a 2L bulky bottle for home, a 600 ml carry bottle, a large iced glass at the cinemas, and a 250ml that you can hold between your index, pinky and thumb as a style statement. By taking this simple idea seriously, the same cola has penetrated into multiple occasions with no change but how it is served and consumed.  The ‘pffs’ sound of the can, and the handiness of the carry bottle are integral to their occasions, and effective in their execution. 

4. Complementary solution expansion

Most solutions don’t perform the full job that the consumer is trying to do. For instance, shampoo might clean a consumer’s hair, but cleaning one’s hair isn’t the whole job that the consumer is trying to do. The consumer is trying to clean the whole body, smell good, and look & feel presentable. The consumer probably uses multiple solutions to complete the full job. If a brand is used in any part of the job, it can leverage the opportunity to introduce solutions that help do more of the job more effectively or efficiently. For example, keeping hair healthy is essential to the complete job of looking and feeling presentable, yet many consumers don’t use a conditioner. Shampoo brands have introduced shampoo + conditioners to help consumers do more of the job, better in less time and consumer pay premium for it. 

A combination of the above approaches may be deployed to increase returns without bloating portfolios and increasing management complexity.