PRODUCT MIX DECISIONS-Marketing

Product Mix

A product mix (also called product assortment) is the set of all product lines and items that a particular seller offers to sale.

A company’s product mix can be described as having a certain width, length, depth, and consistency.

· The width of the product mix refers to how many product lines the company carries.

· The length of product mix refers to the total number of items in its product mix.

· The depth of product mix refers to how many product variants are offered of each product item in the line.

· The consistency of the product mix refers to how closely related the various product lines are in end use, product requirements, distribution channels or some other way.

These four dimensions of the product mix provide the bases for defining the company’s product strategy. The company can grow its business in four ways. The company can add new product lines, thus widening its product mix to capitalize the company’s reputation or the company can lengthen its existing product lines to become a more full line company or the company can add more product variants to each product and thus deepen its product mix. Finally the company can pursue more product-line consistency or less, depending upon whether it wants to acquire a strong reputation in a single field or participate in several fields.

PRODUCT LINE DECISIONS

Product Line

A product line is a group of products that are closely related, because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.

Product line managers have two important information needs. First they must know the sales and profits of each item in the line. Second, they must know how the product line compares to competitor’s product lines in the same markets (Product Positioning).

One of the major issues facing product-line managers is the optimal length of the product line. The manager can increase the profits either by adding the product items if the line is too short or by dropping the items if the line is too long.

The issue of product-line length is influence by company objectives. /Companies that want to be positioned as full-lines companies and/or are seeking high market share and market growth will carry longer lines. They are less concerned when some items fail to contribute to profit. Companies that are keen on high profitability will carry shorter lines consisting of selected items.

Product lines tend to increase over time. Excess manufacturing capacity will put pressure on the product-line managers to develop new items. The sales force and distributors will also pressure for a more complete product lien to satisfy their customers.

LINE-STRETCHING DECISION

Every company’s product-line covers a certain pair of the total range offered by the industry as a whole. For example, Maruti Udyog automobiles are located in the low-medium price range of the automobile market. Line stretching occurs when a company lengthens its product-line beyond its current range. The company can stretch its line downward, upward or both ways.

Downward Stretch

Many companies initially locate at the high end of the market and subsequently stretch their line downward. For instance, TATA who are the producers of medium and high price/big car segment, now have stretched downward by entering into small car segment by releasing TATA Indica.

Ø The company is attached at the high end and decides to counter attach by invading the low end.

Ø The company finds that slower growth is taking place at the high end.

Ø The company initially entered the high end to establish a quality image and intended to roll downward.

Ø The company adds a low-end unit to plug a market hole that would otherwise attract a new competitor.

In making a downward stretch the company faces some risks. The new low-end item may cannibalize higher-end items. Or the low-end items might provoke competitors to counteract by moving into the higher end. Or the company’s dealers may not be willing or able to handle the lower end products, because they are less profitable or dilute their image. For instance, General Motors resisted building smellers cars and Japanese companies spotted a major opening and moved in quickly. It is interesting that after seeing the success of Suzuki in small car segment, the other leading companies such as Honda and Toyota are new entering into the market.

Upward Stretch

Companies in the lower end of the market might contemplate entering the higher end. They may be attracted by a higher growth rate, higher margins or simply the chance to position themselves as full-line manufacturers. Again, it is Maruti who initially entered in the small car segment entered higher end by production Maruti 1000 and Maruti Esteem.

An upward decision can be risky. Not only the higher end competitor well entrenched but they may counter attack by entering the lower end of the market. The company’s sales representatives and distributors may lack the talent and training to serve the higher end of the market.

Two-way Stretch

Companies in the middle range of the market may decide to stretch their line in both directions.

Line-Filling Decisions

A product line can also be lengthened by adding more items within the present range of the line. There are several motives for line-filling such as reaching for incremental profits; trying to satisfy dealers to complain about lost sales because of missing items in the line; trying to utilize excess capacity; trying to be the leading full-line company and trying to plug holes to keep on competitors. If line-filling is overdone it may result in cannibalization and customer confusion. The company needs to differentative each item in the consumer’s mind. Each item should possess a just noticeable difference. The company should check that the proposed items enjoys more market demand as is not being added simply to satisfy an internal need.