1. Nature of the Product Mix
Mix & Match
Nature of the Product Mix
Product/Service Management LAP 3

2. Objectives Explain the nature of the product mix.
Describe types of product-mix strategies.

3. Explain the nature of the product mix.
Objective
Explain the nature of the product mix.

4. Would you write a long research paper with no:
Ideas?
Plan?
Outline?
Certainly not!
Same principle is true for businesses.
Product mix requires:
Time
Research
Planning

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. Describe types of product-mix strategies.
Objective
Describe types of product-mix strategies.

16. Product-Mix Strategies
Expansion
Adding additional product items or lines
Reasons to use:
To appeal to a new market
To satisfy customers’ desire for variety
To offer customers complementary products
To spread risk over a wider area
To increase sales and profits
To enhance the company’s reputation
To make more efficient use of company facilities

17. 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.

18. 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

19. 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

20. 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.

21. 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

22. 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.

23. 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

24. 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.

25. 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

26. Product-Mix Strategies
Trading Down
Disadvantages:
Cadillac Cimarron
Dealers may not be willing to add the lower priced product to their offering.
The firm’s reputation for high quality may be damaged by the addition of a lower quality item to its product mix.
Consumers may be confused about the new product or line.
Profits from the cheaper product may be eroded by reduced sales in the more expensive line.
The competition may become stronger at the high end of the market.

27. 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?

28. This leaves many customers stranded, frazzled, and angry.
A budget airline needs to drop several of its destinations as part of a contraction product-mix strategy.
So as not to alarm customers or investors, the company doesn’t make the announcement about the dropped destinations until the day before the flights stop.
This leaves many customers stranded, frazzled, and angry.
What do you think about the airline’s actions?
Did it have a responsibility to let customers know about the product-mix contraction?
Or, was it OK to keep it a secret to protect the company and its objectives?

29. MarkED Acknowledgments Original Developers
Christopher C. Burke, Sarah Bartlett Borich, MarkED
Version 1.0
Copyright © 2009
MarkED Resource Center

30. Digital-based photography sources:
DIGITAL VISION LTD.;
Teenagers Today
Obj. B: #130271
Photos copyright Digital Vision Ltd., all rights reserved.
833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada T2P 3T5

31. Copyright:
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