All you need to know about product portfolio management

Aligning your product offerings with market demands and strategic goals leads to high profitability, improved market position and sustained growth.

Product portfolio management is the key to this alignment. It organizes your inventory and tells you when to allocate resources and when to retire a product.

In this article, you’ll learn about the key benefits and principles of product portfolio management to make smarter product decisions and stay ahead of the competition.

What is product portfolio management?

Product portfolio management (PPM) is about strategically managing your company’s product line. It involves understanding how well each product serves customer needs while meeting larger business objectives like profitability and risk mitigation.

PPM also involves examining the external environment, such as market trends or competitor products, to guide product decisions. Analyzing this data helps you maximize your portfolio’s value by creating better strategies, such as developing new products, investing more in your best-sellers or phasing out specific offerings.

Without PPM, companies risk funneling resources into products that don’t contribute to the bottom line – a waste of time, budget and workforce skills.

Apple, for example, continually assesses and optimizes its product portfolio. Here’s a timeline of their product innovations in the past two decades.

PPM helps Apple decide when to refresh existing products (e.g., the iPhone), introduce innovations (e.g., Vision Pro) and discontinue older products (e.g., the iPod) so that their product line always stays relevant and profitable.

Without PPM, Apple might not be the giant it is today. It might’ve remained focused on the iPod while competitors like Android released new products. If it hadn’t had proper resource allocation, it might have invested too much in laptops while the innovative iPad struggled.

Who is responsible for product portfolio management?

Product portfolio managers oversee a company’s product portfolio. Their tasks include strategic planning, tracking product performance, managing resources and balancing risks across new and existing products.

They typically rely on input from other team members and stakeholders for guidance.

For example, product managers and marketing or sales teams can provide insights on individual products, customer feedback and market trends, which can help business leaders make informed portfolio decisions.

In smaller companies, founders and CEOs often handle PPM directly.

Product portfolio management vs. product management

Product portfolio management (PPM) focuses on a company’s entire product line.

Portfolio managers analyze product performance, decide which products to grow, retire or invest in and ensure the portfolio stays competitive and profitable.

Product management focuses on individual products. A product manager is responsible for one product’s development, performance and success, ensuring it meets customer needs.

One of the main objectives of product portfolio management is strategic alignment. While product managers fine-tune specific products to boost customer satisfaction, portfolio managers ensure that all products work together to achieve long-term business growth.

Why is product portfolio management important?

Portfolio management gives you a holistic view of your products and helps you align each offering with customer needs and your company’s strategic goals.

Here are the top benefits of product portfolio management for your business.

Maximizes profitability

Product portfolio management helps you focus resources on the most promising products and markets, which can drastically improve your bottom line.

Measuring sales performance across the board helps your business prioritize high-revenue products and cut underperformers.

For example, an online clothing store might notice that festive sweaters and dresses sell more during the holiday season. To maximize ROI, they could increase inventory for these top-selling items in the lead-up to Christmas and phase out slower-moving lighter apparel.

Manages and mitigates risk

Diversifying your portfolio helps you spread risk across different products (e.g., at varying lifecycle stages or targeting different segments). Balancing risk lets you build a resilient business that is less vulnerable to individual product failures or market disruptions.

For example, P&G focused heavily on products like hand sanitizers, face shields and sanitizing sprays during COVID-19 when demand for non-essential consumer goods (e.g., cosmetics and fragrances) was down.

Doubling down on cleaning and personal hygiene products helped the company stabilize during the pandemic.

Simplify the sales process

Research shows that customers often struggle to make decisions when faced with too many choices. Streamlining your product mix, such as retiring old products or merging similar ones into a single one, reduces the risk of “overchoice”, which helps you drive more sales.

Overchoice, also called choice overload, happens when the complexity of the decision-making process overpowers the benefits of diversity.

Companies with well-optimized portfolios enjoy higher conversion rates since sales reps can focus on a few high-impact products with clear value propositions, making the buying process easier and faster for customers.

Stay ahead of the competition

Portfolio management helps your company stay agile and competitive by quickly adapting to market trends and capitalizing on new opportunities. You can also build innovative products by allocating more resources to market research and product development.

Typeform, for example, has managed to stay competitive against big-name brands like SurveyMonkey and Google Forms. It used PPM to keep its product easy to use and agile, particularly as the world shifted to remote work in 2020 and focus groups were more difficult to organize.

The survey company has also launched a new VideoAsk product to expand its capabilities while remaining accessible to its market.

Encourage data-driven decision-making

Using product portfolio management tools, your business can track (and centralize) data such as sales trends, demand patterns, profitability and product lifecycle stages. Giving teams across your organization access to this data helps them make informed decisions at every step.

For example, your sales team can analyze product performance data to upsell the most profitable subscription tiers. Marketing can examine demand patterns to adjust campaigns and promote features that drive more leads. Product development can use customer feedback and lifecycle data to plan updates and new feature rollouts.

5 key elements of product portfolio management

Product portfolio management is a data-driven, analytical and cyclical process. It involves regular product reviews (e.g., monthly or quarterly), quick pivots to adapt to market movements and strategic resource allocation to stay ahead of the competition.

In this section, we’ll break down five components of successful PPM, from in-depth analysis to strategic alignment to resource allocation.

1. Market analysis

Market analysis involves studying customers, competitors and market conditions to understand the larger environment in which your business operates.

This “big picture” perspective helps you identify gaps in the market, forecast demand and differentiate your offerings. Ultimately, it allows you to make strategic decisions about developing, maintaining, upgrading or retiring products.

Here are some ways to conduct a thorough market analysis as part of your PPM strategy:

• SWOT analysis. Analyze your company’s internal strengths and weaknesses as well as external opportunities and threats.

• Competitor analysis. Know the products, features and value your competitors offer and measure how you stack up against them.

• Customer feedback analysis. Understand customer preferences, habits and frustrations by analyzing direct and indirect feedback.

For example, initial market analysis might determine that AI features are gaining traction in your productivity software market. Using this information, you run SWOT and competitor analyses and find that your competitors have put AI features on their roadmap.

You interview some of your loyal customers and collaborate with customer support to learn that an AI-generated project summary is highly requested. With this information, you plan to include AI in the tool’s next major update.

2. Inventory analysis and categorization

Inventory analysis (or portfolio analysis) involves assessing the performance and growth potential of each product you offer to see how it contributes to your company’s success.

It lets you identify which products drive growth, which provide steady revenue and which might be draining your resources. Evaluating your product line helps you with strategic planning and resource allocation later.

Consider and categorize each product according to its value to the company. There are many ways to do this, but many portfolio managers use the Boston Consulting Group (BCG) matrix.

The BCG matrix is a simple tool that lets you categorize your products into four quadrants:

• Stars. High growth, high market share

• Cash cows. Low growth, high market share

• Question marks. High growth, low market share

• Dogs. Low growth, low market share

Visualizing your entire portfolio using the BCG matrix helps you plan your investments. For example, you might want to:

• Pour more resources into the “Star” to maintain its growth

• Milk the “Cash Cow” for short-term profits

• Carefully nurture the “Question Mark” to capture a higher market share

• Reposition or phase out the “Dog” to avoid draining resources

Also, analyze the distribution of your products across the matrix. Look for imbalances, such as having too many products in one category. This could indicate a need for diversification or new product innovation to avoid the risk of overreliance on particular product types.

For example, our fictional productivity software company might learn from the BCG exercise that its unique reporting add-on tool is gaining popularity with Enterprise clients and is a “Star” product.

Based on this, it decided to allocate more resources to its development and target its marketing toward big companies.

3. Product life cycle and pricing analysis

Knowing where each product is in its lifecycle helps you predict changes in sales, adjust your pricing and marketing, and plan for future growth.

It also lets you balance your portfolio with products at different stages so you get the most out of your limited resources. For example, you might consider retiring products past their prime to invest more in products at the introduction or growth stage.

In 1965, economist and professor Theodore Levitt wrote an article in the Harvard Business Review outlining four distinct stages a typical product goes through throughout its life: introduction, growth, maturity and decline.

Since then, product managers have used the lifecycle to determine everything from pricing strategies, feature updates, retirement and more.

Understanding where each product is in its lifecycle helps maximize profitability, maintain competitiveness and extend its relevance in the market.

Here are those lifecycle stages in more detail:

• Introduction (or market development). When a new product is introduced into the market, sales and demand are relatively low. Companies often benefit from spending more on marketing and building brand awareness.

• Growth. When demand for the product starts to take off and sales increase, the goal should be to expand your market share and build brand loyalty rapidly.

• Maturity. When the product is more mature, demand levels off and sales grow with the population. Competition increases, and so does the need to fine-tune the product and retain market share. Brands often start finding new markets or cutting costs to survive.

• Decline. In product decline, sales begin to taper off as customers lose interest. Companies consider how to get the most value from the product before discontinuing.

Returning to our productivity software example, they may determine that several competitors also offer a whiteboard feature, which the company currently includes in its additional paid-for tools. When surveyed, their customers no longer include this among their must-have features.

As this feature has passed its peak demand, the company decides to absorb it into its base product rather than require additional payment for the tool. This appeases current customers while tempting new customers with added functionality.

Understanding where each of your products is in its lifecycle helps you make strategic decisions about resource allocation and pricing based on likely demand.

4. Strategic-fit analysis

Strategic-fit analysis is about ensuring your products align with your business goals. It helps you spot products holding you back from achieving your strategic objectives or where you might need to innovate to strengthen your position.

Strategic alignment is crucial for small businesses. You can’t afford to spend time and money on products that don’t serve your vision. By ensuring each product fits your strategy, you can build a stronger market presence and use your resources more wisely.

Here’s how to analyze your product portfolio’s strategic alignment.

• Clearly define your business strategy. Consider your company’s mission, values, strengths, target customers and desired position.

• List all your products and their key features. Include each product’s primary function, value proposition, current performance and lifecycle stage.

• Evaluate how each product supports your strategy. Does it serve your target market? Does it use your core strengths? Does it help your market position?

Create a product roadmap to get a holistic view of each product’s features, lifecycle stage, timeline and how it fits into your overall strategy. Below is an example of a portfolio roadmap.

Say our productivity software plans to go after bigger fish: more enterprise clients. The company plans to partner with communication tools these customers use, like Microsoft Teams and Zoom. Knowing this, the product portfolio manager adds integrations with these tools to their product roadmap.

5. Resource allocation and optimization

Resource allocation is a key part of product portfolio management. Deciding how best to use time, budget and skills for each product helps maximize returns and minimize risk.

In this stage, you’ll prioritize your resource investments based on each product’s potential for growth and strategic importance to maximize profitability and long-term success.

Sales and marketing tools, like your CRM, can provide data to support this decision-making. For instance, a “cash cow” whose sales fell last quarter may need a refreshed marketing campaign.

Likewise, if your research shows that demand for eco-friendly products is rising, you might reallocate budget and development efforts toward sustainable packaging or environmentally conscious product lines.

Review metrics for each product or the broad portfolio regularly (e.g., sales mix, feature usage, session duration, etc.) to ensure your resource allocation yields the expected results.

Here are some actions you might want to take during the resource allocation and optimization stage:

• Retire or consolidate underperforming products. For example, if customers rarely use or mention your “search by product ID” feature, consider discontinuing it to avoid wasting resources updating an under-utilized feature.

• Keep innovating, even if you’re small. Set aside some of your budget for research and new product development so you can sell new products (or improve existing ones) to meet changing market demands. For example, incorporating AI-powered features might help your software product stay competitive.

• Explore growth opportunities. Launch initiatives to diversify your portfolio, expand your customer base and create new revenue channels. For instance, if you specialize in large enterprise solutions, consider creating a simplified, affordable version of your product tailored for small to medium-sized businesses.

The productivity software company may have planned to funnel resources into its integrated email tool this year. However, when an international AI conference drums up interest in AI features among its target demographic, it pivots some resources to new AI tool development.

Using Pipedrive for product portfolio management

Pipedrive is a CRM platform that offers powerful product portfolio management tools for small businesses.

Our Products feature makes it easy to monitor product performance, identify trends and optimize your portfolio based on real-time sales data.

Here’s how Pipedrive helps you with your product portfolio management strategy:

• Build a product catalog. Store all product details (e.g., name, price and description) in one place for easy reference and organization.

• Link products to deals. Associate products with specific deals in the sales pipeline to understand how each contributes to your company’s overall revenue.

• Track sales performance. Use custom dashboards to monitor which products perform best and identify underperformers based on linked sales data.

• Facilitate collaboration. Centralize product portfolio insights so everyone in your organization (including sales, marketing and product teams) has a clear view of what’s selling and where there’s room for improvement.

You can also integrate Pipedrive with project management tools like ClickUp and Asana to connect sales data to your product development efforts.

For instance, when a deal closes in Pipedrive, the integration can automatically trigger a task in your project management tool, allowing your team to move seamlessly to the execution stage.

Final thoughts

Product portfolio management helps companies of all sizes streamline their product offerings, maximize return on investment and achieve sustainable business growth. It’s a data-driven process that ensures your company spends its resources where they matter.

Use Pipedrive’s Products feature to track sales, link specific products to deals, centralize product data and optimize your portfolio. It’s the perfect tool for SMBs looking to analyze their products’ performance and impact on total revenue. Sign up for a free 14-day trial today.