Can Superior and Value Products Coexist in the Same Portfolio?

    

Earlier this week I wrote a Business Acumen oriented blog called, How do you Grow KPIs in a Declining Market,” and one of the five recommendations is to diversify the product portfolio andcoexist-products adapt it to the needs of the current market. In that suggestion, I posed the hypothesis that one of the ways you do that is to prioritize the “value” brands (lower price) and deprioritize (for the short term) the premiere brands until there is an economic recovery.

Obviously, that is not going to be the solution for every industry and every company because it does impinge on one of the most sacred pillars of business strategy and that is to choose one value proposition (either product leadership, customer intimacy, or low price) and stick with it. In our business acumen programs that utilize business simulations to build skills, learners are typically “rewarded” with strong performance for taking this path regardless of which value proposition they choose.

But, in reality, many organizations struggle with this issue and hedge their bets by diversifying their solution portfolio to actually have a wider set of offerings to attract more customers. I think this is a worthwhile and practical discussion, especially in challenging times. Oh, let me pose the question, can superior products and value products coexist in the same portfolio?

While it is not perfect, the answer is, yes, absolutely! Based on the work we do in business acumen and the way we model our business acumen simulations, here are five thought-provoking points to work through the answers for your company and your portfolio. Here is how they complement each other and hurt each other:

Cross-Selling and Upselling

In challenging times, a company might use value products to introduce customers to the brand, with the strategy that they might upgrade to superior products over time and certainly when the challenging times are over.

Creating Unique Competitive Advantage

Having both types of products allows a company to compete in different segments of the market and adapt to changing customer demands and market conditions.

Disciplined Market Segmentation

By definition, different products offer a different set of perceived value to different customer types within a market. In challenging times, you need to have much more of a disciplined marketing approach so your superior products will appeal to premium customers looking for high-quality innovative solutions without feeling like they are overpaying, while value products will attract cost-conscious customers still willing to buy them but at the lowest possible price.

Brand Diversification

Offering both types of products allows a brand to appeal to a wider audience and reduce risk. This approach can help a company maintain market presence across various economic conditions, grow revenues, spread costs, and identify new customers.

Enhanced Customer Experience

A diverse portfolio can address a broader range of customer needs and preferences, improving overall customer satisfaction and strengthening brand equity.

As great as all this sounds, there are definitely a few potential negatives to consider before dramatically changing your strategy and portfolio. The biggest challenge is in execution. It is extremely hard from an operational perspective to run a company with multiple strategies. As a basic example, the time, cost, and training of shifting supply chain processes could be overwhelming and cost-prohibitive. Think back to the challenges that Toyota had when they were manufacturing premiere cars (Lexus), high-quality cars with a lot of services built in (good old fashioned Toyota Corolla), and the very inexpensive Scion (it got you there and you owned it for less than $15,000). If you can figure out how to execute, you can make it work!

The key is to manage these products effectively so that they don’t cannibalize each other’s sales and that each product category is positioned clearly in the market.

Why Business Acumen Matters

Robert Brodo

About The Author

Robert Brodo is co-founder of Advantexe. He has more than 20 years of training and business simulation experience.