Product Mix Decision
Four
dimensions of a product mix are: width, length, depth, and consistency.
(1) The first of the product mix decisions refers to
the product mix width. The width is all about the number of
different product lines the company carries. Product line breadth refers to how
many (or how broad) is the range of products offered by the firm.
Example, Colgate has 3 product lines. Thus, it has a rather
limited width.
For example, a manufacturer of kids clothing, could produce
shirts, pants, and skirts only – having quite a limited breadth of clothing
products.
Compare this
to another manufacturer who may have the same product line as the first
manufacturer, but they also offer hats, shoes, sunglasses, other accessories,
and even some toys – they have a broader product line offering.
(2) The product mix length refers to
the total number of items a company carries within the product lines. Product line length
refers to how many different types of products are included in the product
line.
For instance, Colgate carries several different brands within
each line. In Colgate’s oral care product line, several different categories of
toothpastes can be identified.
A car
manufacturer may have several series in its car product line, such as 3-series,
5-series, and 7-series.
For example, using the same example of a manufacturer of kid’s clothing, they might
decide to offer 20 different designs of shirts for boys. This is their product
line length for shirts.
(3) The next one of the product mix decisions is
the product mix depth. It refers to the number of versions offered
for each product in the product line. Product depth refers to the number of products they offer
which are variations of the product.
For instance, Colgate toothpastes come in several tastes and variations.
The vehicle
manufacturer’s 3-series in the car product line may be offered in several
versions: convertible, coupé, sedan, and so further.
For example, a manufacturer of kid’s clothing may design a shirt for sale. This one
shirt will then be produced in different colours and sizes. The number of
variations of the same shirt is considered to be the product depth.
(4) Finally, the consistency refers
to how closely related the product lines are in terms of end use, production
requirements, distribution channels or any other way. Product line consistency
refers to how similar – particularly in relation to the overall positioning –
the set of products under the product line are.
In Colgate’s
case, we can observe a rather strong consistency, which
is based on the fact that all product lines constitute consumer products and go
through the same distribution channels.
The vehicle
manufacturer also has a
relatively consistent product mix, since both product lines contain
consumer-vehicles, can be sold in the same way etc.
Continuing
with the kids clothing manufacturing
example, a manufacturer who mainly produces cute looking shirts for girls would
be considered to have a high level of product consistency.
However,
another manufacturer may have a couple of cute shirts, then have some funny
shirts, and even have some quite bizarre shirts on offer as well – in this
case, there appears to be little product consistency, making it harder to
communicate a clear positioning.
Product
Mix Decision
Product
mix decision refers to the decisions regarding adding a new or eliminating any
existing product from the product mix, adding a new product line, lengthening
any existing line, or bringing new variants of a brand to expand the business
and to increase the profitability.
(A) Product
Line Decision -
Product line managers take product line decisions considering the sales and
profit of each items in the line and comparing their product line with the
competitors' product lines in the same markets. Marketing managers have to
decide the optimal length of the product line by adding new items or dropping
existing items from the line.
(B) Line
Stretching Decision -
Line stretching means lengthening a product line beyond its current range. An
organisation can stretch its product line downward, upward, or both ways.
1. Downward Stretching means adding low-end items in the
product line, for example in Indian car market, watching the
success of Maruti-Suzuki in small car segment, Toyota and Honda also entered
the segment.
2. Upward Stretching means adding high-end items in the
product line, for example Maruti-Suzuki initially entered
small car segment, but later entered higher end segment.
3. Two-way Stretching means stretching the line in both
directions if an organisation is in the middle range of the market.
(C) Line
Filling Decision - It
means adding more items within the present range of the product line. Line
filling can be done to reach for incremental profits, or to utilise excess
capacity.
Ways to
increase business with Product Mix Decisions
We can
identify four ways in which a company can increase its business on basis of the
four product mix decisions determined above.
1. Add new
product lines: widen the product mix. New lines benefit from and build on the
company’s reputation in its other lines.
2. Lengthen
the existing product lines. More items in the product lines may result in a
more full-line company.
3. Add more
versions of each product: Deepen the product mix.
4. Make
product lines more consistent. This depends on whether the company wants to
have a strong reputation in a single field or in several fields of business.
The four
product mix decisions are more than a strategic issue that has some impact on
the company’s success. To be precise, the product mix is one of the most
critical instruments the company has. It is the centre of its offerings.
Therefore, the right product mix decisions should be taken, in line with
customer needs. Since customer needs may change rapidly, product mix decisions
need to be taken more than once at the beginning – product mix decisions are
part of an ongoing process. Only if product mix decisions are taken on an
ongoing basis, maximum value for customers can be created.
No comments:
Post a Comment