Costs of Maintaining-Large Product Portfolio

Definition

The costs of maintaining a large product portfolio refer to the expenses and challenges associated with managing and sustaining a diverse range of products within a company's product offerings.

Key Points on the Costs of Maintaining a Large Product Portfolio

Increased Research and Development Costs:

• Companies with a wide array of products often incur higher research and development (R&D) expenses. This is because they need to invest in the creation, improvement, and innovation of multiple products simultaneously.
• Example: A technology company that manufactures various gadgets, such as smartphones, tablets, and laptops, must allocate significant funds towards R&D to ensure each product remains competitive and up-to-date with the latest technology.

Marketing and Advertising Costs:

• Maintaining a large product portfolio typically requires extensive marketing and advertising efforts to promote and differentiate each product effectively. This can result in higher marketing expenditures.
• Example: A consumer goods company offering a broad range of household and personal care products must allocate substantial resources to marketing campaigns, including television commercials, online advertising, and promotional events, to ensure each product gains visibility and consumer recognition.

Impact of Bad Publicity:

• Negative publicity or issues associated with one product in a large portfolio can have a detrimental impact on the sales and reputation of all products within the portfolio. The brand's overall image may suffer.
• If a well-known automobile manufacturer experiences a widely publicised safety recall or product defect in one of its car models, consumer trust in the entire brand may erode, affecting sales across the entire product range.

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Costs of maintaining a large product portfolio

Business Management

Resource Allocation and Performance:

• Maintaining a large product portfolio may lead to resources being spread too thin. This can result in insufficient attention and resources dedicated to individual products, potentially affecting their performance and profitability.

• Example: A company with numerous product lines, including both established cash cow products and newer additions, may face challenges in prioritising resources. If resources are not allocated optimally, it may impact the growth and sustainability of profitable products.

Summary:

In summary, the costs of maintaining a large product portfolio encompass increased expenses related to research and development, marketing, and advertising. Additionally, businesses should be aware of the potential risks associated with negative publicity affecting the entire portfolio and the need for effective resource allocation to ensure the performance of all products within the portfolio.