Transcript Nature of the Product Mix Product/Service Management LAP 3 Objectives Explain the nature of the product mix. Describe types of product-mix strategies.

Nature of the Product Mix
Product/Service
Management
LAP 3
Objectives
Explain the nature of the product mix.
Describe types of product-mix strategies.
Objective
Explain the nature of the product mix.
• Would
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 Ideas?
• Product
mix requires:
 Plan?
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 Outline?
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not!
 Planning
Product Mix
• Product mix—the particular
assortment of products a
business offers to meet:
 Market needs
 Company goals
• Every business must choose
a product mix.
• Varies from:
 Industry to industry
 Business to business
Product Mix
• Product mix consists of:
 Product items:
 Each individual good, service, or idea
that a business offers for sale
 Distinguished by size, style, brand
name, price, color, materials, or any
feature that makes one item different
from another
 Examples:
 A Louis Vuitton handbag
 A fishing license for the state of
Montana
 A bottle of Softsoap body wash
Product Mix
• Product mix consists of:
 Product lines:
 A group of related product items
 May be classified according to:
 Product class (similar
characteristics/functions)
 Customer group (same target market)
 Price and/or quality
 Distribution method
Product-Mix Dimensions
• Width
 Also called breadth
 The number of product lines a
company carries
 Narrow product mix:
 Offers a limited number of
product lines
 Allows a company to:
 Specialize effectively
 Produce efficiently
 Concentrate its marketing
efforts on its few product lines
Product-Mix Dimensions
• Width
 Broad product mix:
 Offers many product lines
 Provides many opportunities to:
 Make sales
 Appeal to customers with a
variety of needs
 Promote one-stop shopping
Product-Mix Dimensions
• Depth
 Also called length
 The number of products and the
assortment of sizes, colors, and
models offered in a company’s
product lines
Product-Mix Dimensions
• Depth
 Deep product mix:
 Offers a great many items within
the product line
 Allows the business to:
 Meet the needs of a variety of
consumers
 Use a range of prices
 Compete effectively
Product-Mix Dimensions
• Depth
 Shallow product mix (also called
a short product mix):
 Offers few items within the
product line
 Helps control costs and ensure a
profit
Product-Mix Dimensions
• Consistency
 How closely a company’s
product lines are related
in terms of:
 End use
 Methods of distribution
and production
 Target market(s)
 Price range
 Consistent or inconsistent
Importance of Product-Mix Decisions
• One of the most important
decisions a company makes
• Helps to:
 Appeal to target market
 Present consistent
company image
 Achieve and maintain
profitability
 Deal with competition
Objective
Describe types of product-mix
strategies.
Product-Mix Strategies
• Expansion
 Adding additional product
items or lines
 Reasons to use:






To appeal
satisfy customers’
to a new market
desire
for
variety sales and
To increase
To
offer customers
profits
complementary
products
To enhance the company’s
To spread risk over a wider
reputation
area
To make more efficient use
of company facilities
Product-Mix Strategies
• Expansion
 Disadvantages:
 Increases costs of inventory,
marketing, transportation,
storage, and personnel
 If new products are more
complex or sophisticated,
the sales staff may require
additional training to sell
them.
Product-Mix Strategies
• Contraction
 Removing product items or lines
from the product mix
 Used when product:
 Has lost its appeal to customers
 Is no longer appropriate to the
company’s goals
 Is no longer profitable
 Conflicts with another product in
the mix
 Has production problems
 Has become a legal liability
Product-Mix Strategies
• Contraction
 Disadvantages:
 Increases market risk—the fewer
products or lines a company has,
the greater the financial risk to the
company if one of them fails.
 Competitors may step in to provide
the products and draw away
customers.
 May have a negative effect on
salespeople who are trying to serve
customers loyal to the
discontinued products
 Can damage customer goodwill
Product-Mix Strategies
• Alteration
 Making changes in the company’s
products or lines
 Products may be completely
redesigned or changes may be
made in their basic styles,
characteristics, packaging, or
pricing.
Product-Mix Strategies
• Alteration
 Reasons to use:
 To limit costs
 To keep up with changing
consumer preferences
 To compete effectively
 To reach a different target market
 To reach a larger market
 To improve products for social
good
Product-Mix Strategies
• Alteration
 Disadvantages:
 Altering one line at a time can be
quite expensive.
 Altering in stages gives competitors
the chance to observe the changes
and alter their own products
accordingly.
 There are limits to the extent to
which alteration can be used.
 Not all products can be altered.
 It is impossible to predict the
success of the altered product.
Product-Mix Strategies
• Trading Up
 A company decides to add a
higher priced product or line to
its mix.
 Also sometimes called stretching
up or brand leveraging
 Reasons to use:
 To enhance company image
 To increase sales of the
company’s other products
 To attract a new target market
Product-Mix Strategies
• Trading Up
 Disadvantages:
 While sales may be generated for
the new product or line, sales of
established products may decline.
 The business must be careful that
present customers are not lost in
the process of gaining new ones.
 Customers may become confused
as to what the company’s image is
meant to be.
Product-Mix Strategies
• Trading Down
 A company decides to add a lower
priced product or line to its mix.
 Also sometimes called stretching
down
 Reasons to use:
 To attract a new target market
 To meet the competition
Product-Mix Strategies
• Trading Down
 Disadvantages:
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 The
Dealers
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market.
 Profits from the cheaper product may
be eroded by reduced sales in the
more expensive line.
• What product-mix strategy is your
place of employment currently
using?
• For what reasons has this
particular strategy been chosen?
• Is it working?
• What disadvantages is the
business experiencing by using
this strategy?
budget
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MarkED
Acknowledgments
Original Developers
Christopher C. Burke,
Sarah Bartlett Borich, MarkED
Version 1.0
Copyright © 2009
MarkED Resource Center
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