Wednesday, November 11, 2009

Managing the Product Mix

If an organization is marketing more than one product it has a product mix. o Product item--a single product o Product line--all items of the same type o Product mix--total group of products that an organization markets
In a dynamic marketing environment, the product mix is not static. The effects of changing technology, evolving competition and changes in customer needs mean that is most important for an organization to find ways of keeping its product ranges fresh and interesting. This opens up a number of management problems, requiring planned procedures and strategies in order to: o retain and maintain existing products so that they continue to meet their objectives o modify and adapt existing products to take advantage of new technology, emerging opportunities or changing market conditions. o delete old products that are close to the end of their working lives and no longer serve their purpose o introduce a flow of new products to maintain or improve sales and profit levels and to form a firm foundation for tomorrow’s market. Too many products could put an organization at risk, as product launch is resource intensive with no guarantee of success. At the other extreme, too many declining products could threaten the future of the business as sales and profits start to fall.
Elements of a Product Mix Depth measures the # of products that are offered within each product line. Width measures the # of product lines a company offers.
Product decisions Marketers make product decisions at three levels: o individual product decisions o product line decisions o product mix decisions
1. Individual product decisions are focused around the development and marketing of: o Product attributes o Branding o Packaging o Labelling o Product support services.
2. The product line is comprised of a group of products that are closely related because: o they function in a similar manner o are sold to the same groups o are marketed through the same types of outlet o fall within given price ranges The product line length involves the number of items in the product line. It is greatly influenced by the company objectives and the resources. Product line growth needs to be planned carefully and is extended in two ways: ‘stretching’ and ‘filling’.
Product line stretching Downward stretch: Company initially located at the top end of the market and then ‘stretches’ downwards to pre-empt a competitor or respond to an attack. Launch of C-Class by Mercedes-Benz. Upward stretch: Companies stretching upwards to add prestige to their existing range of products. Toyota with the Lexus. Can be risky due to customer perception and inability of sales people to trade up and negotiate to the new level. Two-way stretch: Extending product lines upwards and downwards to address different segments of the market.
Product line filling: Increasing the product line by adding more items within the present range of the line. Reasons for product filling: § Extra profits § Satisfying dealers § Using excess capacity § Being the leading full-line company § Plugging holes to keep out the opposition Care needs to be taken that the line filling does not lead to cannibalisation and customer confusion.
3. Product mix decisions Product mix or product assortment consists of all the product lines and items that a particular seller offers for sale to buyers. Dimensions of the product mix Breadth or width - Wide product mix containing many different product lines. E.g Unilever producing cooking oil, toilet soap, cosmetics etc. Length - Total number of products in the product lines Depth - Different versions, such as size of packaging and different formulations. Consistency - How closely related the various product lines are in end use, production requirements, distribution channels etc