Portfolio Management Part 1: Updating Products

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which products in your portfolio should be updated?

SME sportswear brands in relatively niche markets like 'Outdoor' may not have the resources to seasonally or even annually update all of their portfolio. In fact, perhaps with the exception of colour-way changes, it's unlikely that any single technical product will be revised each and every season.  Fortunately for these small brands consumers don't expect or demand seasonal change in niche and performance sports products, in the way that is expected of fashion-following product markets.  So for the SME, the inevitable question arises "which of our products should be updated over the forthcoming development season?"

Product updates (in red) and new additions (in blue) are added to the visual line plan at the start of the development season. 

determining product success

In one in-house job I had, the decision to update products was invariably made by scanning through our sales figures and taking aim at products with flagging sales.  This made me a little uneasy because I felt that sales figures shouldn't be one's only guide to the merits and failings of a product.  Sales figures need to be seen in context, and only in that context can they be properly interpreted.

Of course, unless you're selling direct-to-market, sales figures (which reflect the stocking of your product by retailers) don't necessarily correlate with sell-through (consumer purchases of those products from the retailers).  There's going to be an interesting interplay going on behind the figures on the shop floor and in the buying department at the retailer.

Failing product sales should be distinguished between those of relatively new products whose sales haven't reached the expected levels and those of established products whose sales have fallen below an acceptable level.

In the former case, perhaps buyers have warmed to the product quicker than the public and so after initial enthusiasm at the sales launch, poorer than expected first-season sell-through may result in short term loss of confidence by retail buyers.  It may be that retail staff are failing to sell the advantages of the product.

In the latter case, when a product is well established, failing sales may merely be a result of the sales team having switched focus to selling the newer or more recently updated pieces in the portfolio.  Perhaps sales have been "stolen" by newer products in the portfolio?  This wouldn't reflect a failure in the overall design and/or marketing of that product, but may represent an instance where you may wish to discontinue it in favour of the better selling product that has stolen its sales (this topic will be covered at greater length in Portfolio Management Parts 2 and 3.)

The sales team are likely to know when product sales have been stolen by other products in the range.  They will also be well placed to find out if sales dropped due to new competition bursting on to the market, splitting sales amongst a greater number of competitors.*

This last point brings us on to possibly the most pertinent objection to focusing on your own sales figures, one which was recently reiterated by Ian Cheshire on The Bottom Line program on BBC Radio 4**.  Ian warns us that we should look at how the market did overall in our sector or product group before passing judgement.  Without knowing your product's relative market share, a drop of 20% in sales might actually be a really good thing if the rest of the market dropped by 40% on average.   Vice versa, if your sales went up 10%, but everyone else improved by 20%, then a product that at first glance seemed successful, actually is a relative failure.

Sales figures must be seen in context - their relative market share is more important than their net size.

So product success may appear as failure, and vice-versa, product failure may appear as success.  Gaining the data to determine your product's relative market success would be very beneficial to gain a more objective evaluation of sales performance.

Having said all that, I need to add a few provisos here.  Don't waste your efforts in trying to gather a heap of information about a product when you already know enough to make a good call.  If a product feels 'old-hat' to you it will almost certainly benefit from updating.  It can be difficult and/or costly to get sales information from your retailers and obtain wider market statistics.  Efforts to research market share should reflect the importance to the brand of the product or product line in question (and beware the law of diminishing returns!)

Please keep in mind:

• The search for knowledge and understanding is a never-ending one.
• Information is a double edged sword - with too much of it you can be hit by 'analysis paralysis'.
• Searching for reasons behind statistical events can be fruitless if there are none.

The optimal quantity of information before analysis paralysis will be in inverse proportion to the complexity of the decision making process (or analysis).  Less information will ease the process of making a more complex decision. 

be proactive

Updating products isn't all about rectifying weaknesses.  It should also be about pro-actively looking for new opportunities (more on innovation in Portfolio Management Part 4.)  It's complacent to just 'up keep' the portfolio.  Whether they are cosmetic or profound innovations, making changes to the portfolio shows that a brand has life and energy and this is something that will captivate people's interest and imagination.

but...

Don't upset retailers by updating products too regularly - it will ultimately disappoint their existing customers if they find that their relatively new garment has just been superseded by a superior product so soon after their purchase.  (For more discussion on this subject, see Portfolio Management Part 4.)

The question that naturally leads on from this topic is "how do you best go about updating products?"  This isn't strictly a question about portfolio management so I'll try answering it in a future post.

*It occurs to me that it may be a very eye-opening exercise to get the design team to shadow a sales rep for one day to see how they go about selling different products in the portfolio.


** 24/02/2011 http://www.bbc.co.uk/programmes/b006sz6t