‘What’s the secret to a revenue-rich and profitable product portfolio?’
Q: We’re a medium-sized health care company. We’ve grown both in revenue and profit although in the past to five years our growth rate has been going down. Our marketing director who attended your product and brand architecturing seminar told us that our problem must be in our product portfolio. We’ve kept adding new health care product categories as well as new brands within a given health care segment.
Our marketing director suggested that we should benchmark against Unilab. She said Unilab has continued to grow its pharma business over the past 50 years or more. It’s in almost all therapeutic segments. But it has also grown its brands per segment. For example, she told us that in the paracetamol segment alone, Unilab has Biogesic, Medicol, Dolfenal, Afebrin, Naprex and two or three others. She said each brand has a different positioning strategy to guard against those brands cannibalizing each other. Is this Unilab’s real secret to having a revenue rich as well as a profitable product portfolio?
A: It’s good that you mentioned Unilab and its rather broad brand participation in the “paracetamol segment.” We’ll use your Unilab example to answer your question and see if we can uncover that “secret” you’re after.
We start with your equating a product category with a market segment. That’s what is clear from your statement about “adding new health care product categories as well as new brands within a given health care segment.” In many instances, interchanging these two terms reflects what’s true, that is, a product category is also a market segment. But there’s just as many cases when a category is not a segment.
For example, in the research of our MBA students on Ponstan 250 mg, when asked what they would take in place of Ponstan if Ponstan were not available, almost all said either Biogesic or Medicol. As the Warner-Lambert medical directors pointed out, Biogesic is in the paracetamol category and Medicol belongs to the pure ibuprofen category. Ponstan is a mefenamic acid. However, to the Ponstan consumers all three belong to the anti-headache, anti-pain segment. So here, the category is not the same as the segment. This is why at the start of our answer, we put your reference to “paracetamol segment” in quotation marks. In this particular case, the category is marketer-defined while segment is consumer-defined.
There is probably a small consumer segment who are medically knowledgeable and who care about the difference among a mefenamic acid, a paracetamol and a pure ibuprofen. When Ponstan is not around, these consumers would ask for another mefenamic acid brand. This happens to be Dolfenal. And that’s the brand they would ask for. This happens to be the case in the U.S. market. Consumers have become sophisticated enough. The category they buy happens to be the segment they count themselves into.
Now, we proceed to your question about Unilab’s “real secret to having a revenue rich as well as a profitable product portfolio.”
You asked if this real secret happens to be in the way Unilab follows for its different brands “different positioning strategies to guard against those brands cannibalizing each other.” Let’s first take two Unilab brands in the same consumer-defined market segment, namely, Biogesic (a paracetamol) and Medicol (a pure ibuprofen).
Unilab has effectively positioned Biogesic as superior in safety. On the other hand, Medicol being an ibuprofen is positioned on speed of pain relief. This differentiation is expected to prevent Biogesic users from taking Medicol when they can’t find Biogesic.
Something similar is assumed about Medicol consumers from migrating to Biogesic should Medicol happen to be unavailable.
Our MBA students’ data tell us that at least, at the time of the research, consumers looking for pain relief were ready to interchange these two. So one positioning did not make for a credible brand differentiation among consumers. This must be Medicol’s positioning because Biogesic has acquired in the consumers’ minds ownership of the “safety” positioning.
Let’s now take two Unilab brands in the same marketer-defined segment or category. This is Naprex and Rexidol. Both are paracetamol. Unilab’s Division, Pediatrica, positions Naprex simply for “pain or fever or both in infants, child and adults.” On the other hand, Rexidol is positioned as an all-around, universal pain killer: “excellent for relief of pains such as headache, toothache, muscle and joint pains, rheumatoid arthritis, osteoarthritis, peripheral neuritis, and pains associated with minor trauma and surgical procedures; also ideal for lowering fever accompanying flu, common colds, tonsillitis, tuberculosis and other infections.” To students of brand positioning, it’s clear that both brands suffer from a luck of focus: Naprex has no market segment focus. Rexidol has no value positioning focus.
So what product portfolio management Rx’s flow from the foregoing?
1. Manage market segments rather than product categories whenever a product category is not a market segment. Manage product portfolio first from where the consumers are, and only secondarily from where the marketer is.
2. Have a market segment focus. Choose the market segment with which the brand is closely associated in the consumers’ minds.
3. Have a positioning focus. Choose the consumer value or product need with which the brand is closely associated in the consumers’ minds. An all-around, universal positioning for a brand renders the brand as a commodity. Remember, commoditization is the opposite of positioning.
Finally, the segment focusing and the positioning focusing are consumer-defined. They’re not marketer-defined. So do consumer and market insighting research for this.
Keep your questions coming. Send them to us at [email protected] or [email protected]. God bless!
