The term ‘product mix’ implies all the products offered by a firm for sate. It may consist of one line of products or several allied product lines. Product Mix, also known as product assortment, is the list of all products offered for sale by a firm.
Product Mix is defined as the composite of products offered for sale by a firm or a business. Product-mix is the list of all the products offered for sale by a company. It is the composite of products offered for sale by a firm.
Learn about:- 1. Introduction to Product Mix 2. Meaning of Product Mix 3. Concept 4. Structure 5. Factors 6. Components 7. Elements 8. Product Mix Decision 9. Strategies.
10. Product Line Strategies 11. Product Line Decision Strategies 12. Product Line vs Product Mix 13. Organisational Goals and Product Mix.
Product Mix: Meaning, Concept, Decisions, Structure, Factors, Components, Elements and Strategies
Product Mix – Introduction
Product Mix, also known as product assortment, is the list of all products offered for sale by a firm. It is defined as the composite of products offered for sale by a firm or a business.
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Product Mix is four-dimensional – it has width, length, depth and consistency. Width is measured by the number or variety of products manufactured by a single manufacturer. This means the number of product lines the firm produces and sales. Length refers to the number of total products in a firm’s product mix.
Depth refers to the varieties of sizes, colours and models offered within each product line. Consistency refers to the close relationship of various product lines either to their end-use or to production requirements or to distribution channels or to other variables.
One major management aspect involved in product policy is the decision concerning product mix. In course of time, the companies may expand new lines or contract the old lines, after the existing product or develop new user for the existing products. The product mix is one of the elements in the product policy.
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Since a marketing-oriented company sells bundle of customer satisfaction, and not merely physical products, the strategic task requires determinations of satisfaction, which the company proposes to sell to customers. This requires consideration of not only the functional aspects of the product but also its features, design, colour, style, price, distribution channels, etc.
The proliferation of products within the company means that product policy decisions are made at three different levels of product aggregation viz.:
1. Product item – It is a specific version of a product that has a separate designation in the seller’s list. For example Maruti Udyog Ltd’s Baleno is a product item.
2. Product line – Product line is a group of products that is closely related because they perform a similar function, targeted at the same customer group and marketed through the same channels.
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3. Product mix – Product mix refers to products offered for sale by a firm or a business unit. In other words a product mix (also known as product assortment) is the set of all products and items that a particular seller offers for sale, for example, Michelin has three product lines – tyres, maps and restaurant rating services.
In modern days, companies selling a single product are scarcely seen. Though, beginning is made with one product, as and when opportunities come, number of products in the product family. The size of the concern is not the factor to determine range of products. Even, small concern handles a wide range. It all depends upon the ability of managerial personnel. The managerial personnel have to decide upon number of factors relating to a product.
These decisions are broadly categorised into three:
1. Product item.
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2. Product line.
3. Product mix.
The ‘Product’ itself is the product item. ‘Nokia 1100’ is exactly a product of Nokia mobile series. It has its own identification among the customers-group.
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The products which are sold in series, closely related to each other is called product line. These products perform similar function and sold to the same customer. For example Godrej Co produces product line such as – Refrigerator, Washing machine, Cupboard, safety cupboard, furnitures under home appliances.
The term mix means ‘Group’. It is the sum of all products being marketed by a company. It is the entire range of products of a company for sale. There may be homogenous and heterogeneous combination. For Ex – Tata Co Produces Motors Vehicles, (Heavy, Light), Watches, Caterpillars, etc.
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Product-mix is the list of all the products offered for sale by a company. It is the composite of products offered for sale by a firm.
It has three dimensions:
(a) Breadth,
(b) Depth, and
(c) Consistency.
(a) Breadth – Breadth is measured by the number or variety of products manufactured by a single manufacturer.
(b) Depth – Depth refers to the assortment of sizes, colours and models offered within each product line.
(c) Consistency – Consistency refers to the close relationship of various product-lines or their end-use, or to production requirements or to distributional channels.
The fundamental reason for changing product-mix is due to the change in the market demand.
Change in demand occurs due to the following factors:
(i) Increase in population;
(ii) Change in the level of income of the buyers, and
(iii) Change in the consumer behaviour.
The change in consumer behaviour is a continuous source or a reason that invites change in product planning. As long as the profit making is the criterion for the existence of a firm, need for changes in product mix is inevitable.
Product Mix – Meaning
This is the entire range of products of a company for sale. In order words, a product mix is the full list of products offered for sale by a company. A product mix need not consist of related products; for example Godrej has a diverse range of products such as refrigerators, locks, hair dye, toilet soaps, mosquito repellents, etc.
An organization tries to fulfill the following objectives through a ‘product mix’:
(a) Sales growth
(b) Sales stability, and
(c) Profits.
(a) Sales Growth:
A company can achieve sales growth by increasing its shares in existing markets or by finding new markets.
For this, four methods can be adopted to achieve these objectives:
These are:
(i) Market penetration – This is increasing the market share by expanding sales of present products in existing uses. For example- Bajaj Ltd. has increased its market share in two wheeler sales.
(ii) Market development – This is expanding the market share by creating new uses of present products. For example- cell phone users can use their cell phones to watch cricket, news headlines, sending SMS, watching games, movies, etc.
(iii) Product development – This is increasing the market share by developing new products to satisfy existing needs. For example- Philips has introduced a juicer with a strainer, an added feature from other existing products.
(iv) Diversification – This is expanding the market by developing new products to satisfy new consumer needs. For example- the first products of Godrej were Locks. Then the company developed new products like refrigerators, toilet soaps, and hair dye and mosquito repellents.
(b) Sales Stability:
When a company has more than one product to offer, iris desirable to maintain a proper balance in total sales and product mix, so that a product losing market can be balanced by goods sales from another product. Moreover, stable sales helps efficient planning in all phases of production and distribution.
(c) Profits:
If a company has more products to offer, the profit margin may vary from product to product. Some products or services offered by the company are more profitable than others. But the low profit items are doing a lot to sell the company’s more profitable products and they may also serve as an insurance agent.
For example- the Tata Group’s cancer hospital in Mumbai and various educational institutions throughout the country are not meant for profit making. But these social commitments adds value to the company and helps to sell other profitable products like trucks, computer software, etc.
Product Mix – Concept
Companies not only sell just one product but usually they offer a host of products in the market. Some of them may be related and many other unrelated. Composite of all the products offered by an organization in the market makes its product mix. The product mix of a company consists of both product lines and individual products.
A product line is a group of products within the product mix that are closely related, either because they meet the same need, function in similar manner, or share some other characteristic.
The nature of relation between the products within a line may be of following types:
1. They function in a similar manner.
2. They are sold to the same customer groups.
3. They may be distributed through the same types of outlets or channel.
4. Fall within given price ranges.
A product is a distinct unit within the product line, and it is distinguishable by size, price, appearance, or some other attribute. For example, all the courses a university offers constitute its product mix; courses in the marketing department constitute a product line; and the basic marketing course is a product item.
Product Mix decisions at these three levels involves concepts such as width of product mix (variety), depth of product mix (assortment) and length of the product mix. Companies bring changes in its product mix overtime to stay competitive and address the ever evolving wants of consumers.
i. Product Mix Width:
Total number of product lines that a company carries. (Usually a product line represents a distinctive product category). Tata Motors carries a large number of products in its portfolio ranging from heavy trucks, last mile feeder vans, SUV’s, passenger cars etc. with many variants within each product line.
ii. Product Mix Length:
Total number of products (items) that a company carries within product lines. Tata Motors carries many types of passenger cars such as super-economy (Nano), hatchback (Indica), sedan (Indigo), luxury (Jaguar) in its passenger car line.
iii. Product Mix Depth:
Depth refers to the number of product variants (Stock Keeping Unit; SKU/ distinct units) of each product offered in a line. Tata Motors have many variants within each product of a line. For example its Indica hatchback passenger car have LPG version, petrol version, diesel version and each of them have two or three sub variants with added features.
iv. Consistency in Product Mix:
The consistency in product line means how closely the products offered by the company are tied to each other with respect to some criterion such as distribution channel, user groups, production requirements or any other way. Consistency ultimately underpinned by synergy in marketing of product lines.
Product lines of Tata Motors are consistent in terms of distribution channel and up to some extent in R&D. Tata Motors recently announced its plans to combine distribution platforms for passenger cars and light trucks capable of carrying passengers to improve consistency.
v. Line Vulnerability:
It refers to the percentage of sales or profits that are derived from only a few products in the line. Currently Tata passenger car line derives most of its revenue from Indica making the line somewhat vulnerable.
Product Mix – Structure
The structure of a product mix consists of width, depth and consistency:
(a) Width of Product Mix:
The width of the product mix refers to how many different product lines are found within the company. For example- Wipro Ltd. has products like computer software, light bulbs, soap, shoes, vegetable oils, baby products, etc. In this case, we can say that the width of Wipro is six (i.e., six different products).
(b) Depth of Product Mix:
The depth of the product mix refers to the average number of items offered by the company within each product line. For example- the baby products of Wipro have baby soap, baby oil and baby powder. Hence, the depth of the baby products of Wipro is three.
(c) Consistency of the Product Mix:
The consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels or in some other way. For example- Pune based Kinetic engineering makes only scooters and motor cycles.
All the three structures of product mix, viz., the width, depth and consistency, play a significant role in the market rationale. If the company increases the width of the product mix, the company hopes to capitalize on its good reputation and skills in present markets; through increasing the depth of its product mix, the company hopes to get the support of buyers with different tastes and needs. By increasing the consistency of its product mix, the company hopes to acquire an unparalleled reputation in a particular area of endeavor.
The following figure explains the relationships between a company’s product mixes.
Example of Cavin kare Group:
As is clear from the diagram, the product mix consists of four different lines of products i.e. products I, II, III, IV. With an average depth of three products in each product line (first product line has three items, second product line has one, third product has five and the fourth product has three items).
Hence the average depth = 12/4 = 3
Product mix is also referred to as product folio.
Product Line:
A product line is a “group of closely related products which are able to satisfy a class of need, to be used together, to be sold to the same customer groups, to be moved through the same distribution channels or fall within given price ranges.”
For example- Shanaz Hussain’s entire range of beauty products are sold to the same customer groups through the same distribution channels. Similarly Chik shampoo, Nyle herbal shampoo, Fairever fairness cream etc. of Calvin care group can also be called product lines due to the above reason.
Product Item:
A product item is “a specific version of a product that has a separate name or designation in the seller’s list.” For example- Maruti Esteem is a product item of Maruti Udyog Ltd. Similarly, MTR Rava – idli mix is a product item of MTR Foods.
Structure of Product Mix:
The structure of product mix has dimensions of both ‘width’ and ‘depth’. By width of the product mix means the number of different products lines found within the company. In other words, width is carried by the number of product lines carried. For example, Bajaj electrical produces bulbs, fluorescent lights, mixies and grinders, toasters, scooters, pressure cookers and a host of other electric appliances.
The depth of product mix refers to the average number of items offered by the company within each product line. In other words, the depth is measured by assortment of size, colors, models, prices and quality offered within each product line.
The consistency of product mix refers to how closely related the various product lines are in terms of consumer behaviour, production requirements, distribution channels or in some other way. For example, the products offered by the General Electric Company has an overall consistency in the most products involve electricity in one way or the other.
The structure of product mix is three dimensioned:
i. “Width of a Product Mix” refers to how many different product lines the company carries. In other words, it refers to the set of all product lines and items that a particular company offers to buyers.
ii. “Depth of a Product Mix” refers to how many variants are offered of each product in the line. It also refers to the assortment of sizes, colors, models and quality offered within each product line.
iii. Consistency of a Product Mix” refers to how closely related various product lines are in end use, production requirement, distribution channels or some other way to other variable.
According to Kotler, “All three dimensions of product mix have a market rationale. Through increasing the width of the product mix, the company hopes to capitalize on its good reputation and skills in present markets. Through increasing the depth of its product mix, the company hopes to entice the percentage of buyers of widely differing tastes and needs. Through increasing the consistency of its product mix, the company hopes to acquire an unparalleled reputation in a particular area of endeavor.”
A consistent mix is generally easier to manage than diversified mix. It allows the marketer to concentrate on its core competence, build or create a strong image among consumers and trade channels. However, excessive consistency may leave the marketer to a narrow range of business.
The structure of product mix has dimensions of both ‘width’ and ‘depth’.
By ‘width of the product mix’ is meant the number of different product lines found within the company. In other words, breadth is measured by the number of product lines carried. For example, Bajaj Electricals produces bulbs, fluorescent lights, mixes and grinders, toasters, scooters, pressure cookers and a host of other electrical appliances.
The ‘depth of the product mix’ refers to the average number of items offered by the company within each product line. In other words, the depth is measured by assortment of sizes, colours, models, prices and quality offered within each product line.
The ‘consistency of product mix’ refers to how closely related the various product lines are in terms of consumer behaviour, production requirements, ‘distribution channels’ or in some other way. For example, the products produced by the General Electric Company have an over-all consistency in that most products involve electricity is one way or the other.
Kotler observes, “All three dimensions of product mix have a market rationale.” Through increasing the width of the product mix, the company hopes to capitalise on its good reputation and skills in present markets.
Through increasing depth of its product mix, the company hopes to entice the patronage of buyers of widely differing tastes and needs. Through increasing the consistency of its product mix, the company hopes to acquire an unparalleled reputation in a particular area of endeavor.
The dimensions of the product mix, and the ways in which they relate to each other are important for marketing management. Changing the product item involves the issues whether to modify, or add or drop product items.
Changing the width of the product mix involves altering policy at the product-line level, whether to deepen or shorten an existing product line. Changing the product mix involves the issues what markets the marketer should enter or leave; and how to handle communications for the various product lines or items.
Product Mix – 4 Important Factors Affecting Product Mix
The dimensions in the product mix are not constant. They are subject to change. The marketing mix is affected by the internal and external forces. The internal factors are controllable.
The management, whenever wish to change the policy on product-mix, should consider the following factors:
Factor # 1. Cost of Production:
Cost of producing a product is subject to change, the firm, which is able to produce product at lowest-cost than the competitors can alter its existing product mix. Recently co generation (power- generation) by Sugar- industry has become a common phenomenon along with liquor production. On the other hand if cost of production is more than others, it may drop the product.
In the earlier periods, market use to accept the product produced by manufacturer. But, the changes taking place in the market have a bearing on product produced. The two important forces in market are demand and supply. The products demand is affected by the customers desires, abilities, and willing to pay for the product.
Apart from these, the demand for a product influenced by population, behaviours tastes, perferences, composition of customers etc. All these affect product mix of a company.
Factor # 3. Marketing Abilities:
Product-mix is not only affected by market forces, but its ability to market the product. Some-times a product may be demanded by customers, if the company fails to distribute effectively then customers, will shift to another product. The inabilities of company force the product mix to change its depth. A well-established marketing department would get more- number of products both width and depth of product -mix.
Factor # 4. Financial Constraints:
Production of a product should be well supported by financial department. Any mismatch between production and finance would adversely affect the product-mix. A product line if more-profitable needs to be expanded for which financial resources should support.
The product-mix is the extended version of product, keeps on changing constantly. Usually, the expansion / contraction of product-mix has become a strategy of modern organisations. The organisations which take into account the market expectations, would go a long way in the product-mix policy.
Some Other Factors Influencing Product Mix Decisions:
It is very difficult for a company to take a decision about the number of products it should produce at a given time because the number of products or product mix is affected by several factors such as the following –
1. Cost of production – If a company can develop a new product with the help of same labour force, plant and machinery and techniques, it can decide to start the production of that product at lower cost. For e.g. – a by-product can be developed by a company at low cost.
2. Change in company desire – Keeping in mind the objectives of the firm, i.e., maintaining or increasing the profitability of the concern, the firm may eliminate some of its unprofitable processes or may start the process of producing a new product. In this way, the firm tries to make its product mix an ideal one.
3. Goodwill of the company – If the company is of repute, it can market any new product in the market without much difficulty. It may take decision of adding new product without any hitch because it knows that customers will accept any product introduced by firm.
4. Change in the demand of a product – If the demand of a new product is increasing in the market and the production of that new product is beneficial to the company considering its cost of production, utilization of its plant and machinery, and labour force. On the other hand, if the demand of a product is declining fast, it can decide to drop its production.
5. Change in purchasing power of the customers – If the number of customers are increased. With the increase in their purchasing power or with the change in their buying habits, fashion, etc. The company may think of adding one more product keeping mass production or increase in profitability in the mind.
6. Quantity of production – If the production of the new product is considered to be at large scale and the company can add one more item to its product line just to get the economies of large scale production.
Product Mix – 6 Important Components (With Examples)
A product mix comprises various product lines. Each product line has a length and product line depth. The Product mix also has a product mix width or breadth.
Let us see these terms with the help of examples:
1. Product Line:
A product Line is a group of products that are closely related because they perform similar functions, and are sold to the same consumer groups and through the same marketing channels and fall within a given price range.
Example – In LG Consumer Appliances, the various product lines are Refrigerators, Washing Machines, LCD’s etc.
2. Product Line Length:
The length of the product line is the sum or total of the number of products that are available in that line.
Example – If three types of washing machines are available under the LG range of washing machines namely front loading, top loading and semi-automatic, then the length of the Product line of the Washing machines is three.
3. Product Line Depth:
It is the total of the number of variants in each type of the product in the product line.
Example – If in each of the three types of washing machines, the following variants are available –
Front Loading – 8 (Eight) variants (variation in capacity and features).
Top Loading – 19 (Nineteen) variants (variation in capacity and features).
Semi-Automatic – 15 (fifteen) variants (variation in capacity and features).
Then the product line depth is forty two.
4. Width or Breadth of the Product Mix:
It is the sum total of the number of product lines a company carries.
Example – If LG carries a total of seven product lines namely TV/Audio/Video, Mobile phones, Computer products, Washing Machines, refrigerators, Microwave Ovens, Air Conditioners then its Width or breadth is seven.
5. Length of the Product Mix:
The length of the product mix is the sum total of the lengths of all individual product lines in that mix.
6. Depth of the Product Mix:
It is the sum total of the depths of individual product lines in that mix.
Product Mix – Top 3 Elements: Branding, Packaging and Labelling
Element # 1. Branding:
A marketer may sell its products under their generic name or under a brand name. For example, a marketer can sell laptop just as a laptop or as ‘Apple’ laptop. Laptop is the generic name which represents the whole class of the product and ‘apple’ is the brand. A brand name helps a marketer to identify and distinguish his product from that of his/her competitor’s.
Branding is the process of giving a name or a sign or a symbol to products.
The various terms related to branding are as follows:
Brand:
A brand is a name, term, sign, symbol, design or combination of some of these used to identify the goods or services of one seller or group of sellers and distinguish them from those of the competitors.
Branding consists of two components:
(i) Brand name and
(ii) Brand mark
(i) Brand Name – Brand name is the verbal component of a brand. It is the part of brand which can be spoken. Cadbury, Lays, Polo etc. are the few examples of brand names.
(ii) Brand Mark – Brand mark is the symbol, design, distinct colour or a letter. It is that part of brand which cannot be spoken but represents the product.
Trade Mark:
Trade mark is that part of a brand that is given legal protection against the mark being used by any other company. A company can get the exclusive right to use the brand mark and brand name if it is registered with the authorities.
Few Definitions of Brands and Branding:
Branding is creating a corporate brand identity for consumer, and getting that brand identity imprinted on the minds of consumer, and this requires brand positioning and brand management.
A brand today is an entity (product, service, company, person, technology, etc.), that offers a set of value exchange measures between what the owner/market seeks and the price he is willing to pay for.
It has always seemed to me that your brand is formed primarily, not by what your company says about itself, but what the company does. -Jeff Bezos
A product is something made in a factory; a brand is something that is bought by the customer. A product can be copied by a competitor; a brand is unique. A product can be quickly out-dated; a successful brand is timeless. -Stephen King
Your brand’s power lies in dominance. It is better to have 50% of one market, instead of 10% of five markets. -Al Ries
Your brand image is primarily an emotional construct. Emotion is probably always more powerful in swaying people than reason but people like to be able to rationalise their choices. -Drayton Bird
Branding though adds to the cost of packaging, labelling, legal protection or promotion but it provides various advantages to sellers as well as buyers.
Let us discuss the advantages of branding:
Advantages of Branding to the Marketers:
(i) Enables Marking Product Differentiation – Branding helps companies to distinguish their products from that of their competitors and secure and control market for their products.
(ii) Helps in Advertising and Display Programmes – Brand names and brand marks help companies to advertise their products and create effective demand. Products advertised in their generic names create product awareness but does not help to create demand for a specific company.
(iii) Differential Pricing – Branding may create a special liking about the product in customers’ mind and as a result they may not mind paying higher price. Thus, branding enables a firm to charge different price for its products than that charged by its competitors.
(iv) Ease in Introduction of New Product – Well established brand helps a company to introduce its new product under the same brand name and receive positive response. For example, Samsung has extended its Television brand name to Washing machine and other products manufactured under the same company.
Advantages of Branding to Customers:
(i) Helps in Product Identification – Branding helps customers to identify the products which provide them satisfaction and thus facilitate repeat sales.
For example, if you like Cadbury brand of chocolates then you need not make a close inspection or choose other brands while purchasing a chocolate.
(ii) Ensures Quality – Branding ensures a specific level of quality of the product. Companies maintain quality of their products to ensure repeat sales and in case of any deviation in the quality consumers can have recourse to the manufacturer or marketer. This builds confidence amongst customers and increases their level of satisfaction.
(iii) Status Symbol – Well established brands have good quality and govern high price. Possessions of products with high brand value are considered as a status symbol.
Characteristics of Good Brand Name:
Brand name not only represents a product but it is a company’s identity as well. Thus, it is extremely important to choose the right brand name before launching the product in the market.
Some of the considerations which must be kept in mind while choosing a brand name are:
(i) It should be short, easy to pronounce, spell, recognise and remember.
(ii) It should be relevant to the functions of the product and must suggest the product’s benefits and qualities.
(iii) It should be distinctive. For example, ‘Burger King’ or ‘Cafe Coffee Day’.
(iv) It should be adaptable to packing or labelling requirements to different advertising media and to different languages.
(v) It should versatile to accommodate new products which may be introduced from time to time.
(vi) It should be capable of being registered and protected legally.
(vii) It should have staying power and not get out of date. For example, ‘Liril’ or ‘Bournvita’ are brands from years.
Element # 2. Packaging:
Packaging refers to the act of designing and producing the container, box or a wrapper of a product. These days all products may be consumer or industrial, durable or non-durable require special packaging. Packaging is the first move to attract customers thus it plays an important role in the successful selling of a product.
Levels of Packaging:
There are three different levels of packaging:
(i) Primary Level:
It refers to the product’s immediate container. Some products are sold in their primary packaging only. They are kept in the same packing throughout the entire life of the product and consumed by consumers out of same packing. For example, soft drinks, juices, vegetables, match boxes, toothpaste tube etc.
(ii) Secondary Packaging:
It refers to additional layers of protection that are kept or provided till the product is ready to use. The secondary packaging is used either for the safety of the product or to make it more attractive. The secondary pack may be discarded or disposed of during the use of the product.
(iii) Transportation Packaging:
It refers to further packaging components necessary for storage, identification or transportation of products. For example, each unit of product may be packed in boxes containing 20, 50 or 100 units for easy transportation or products which require low temperature may be packed in ice boxes before being sent to customers.
Importance of Packaging:
Packaging has acquired a great significance in the marketing of goods and services for the following reasons:
(i) Rising standards of health and sanitation – With increase in awareness about the importance of quality products most consumers prefer to purchase packed products as there are lesser chances of products being adulterated.
(ii) Self Service Outlets – Packaging has replaced personal selling. Attractively packed products are self-explanatory and thus consumers can comfortably purchase them from self-service and retail outlets. This type of purchasing is becoming more popular in cities and towns.
(iii) Innovative Opportunities – Innovative packaging styles have not only changed the marketing techniques but has also increased the scope of marketing. For example, with development in packaging perishable products like milk can be stored for three-four days. This has not only attracted customers to buy the product but also has increased the scope of selling in far off places.
(iv) Product Differentiation – Packaging is an important means to differentiate products. The size, colour or material of packing attracts customers and also makes real difference in the perception of customers about the quality of the product. A good quality product with cheap packaging will not attract customers as compared to the product with attractive packaging.
Functions of Packaging:
From the above discussions you must have realised that packaging is an important aspect of marketing a product. It not only keeps the product safe but also acts as a product’s identity, attracts potential customers and changes customers’ perception about the quality of the product. Therefore, we can say that packaging performs various important functions in the marketing of goods.
Some of the functions may be discussed as follows:
(i) Product Identification – Packaging helps a firm to identify its products from that of its competitors. For example, Colgate’s primary packaging is of red colour and Pepsodent is of blue colour.
(ii) Product Protection – Products need to be protected during the process of storing, distributing or transporting. Packaging protects the contents of a product against spoilage, breakage, leakage, pilferage, damage, climatic effect etc.
(iii) Facilitating use of the Product – Size and shape of the package helps consumers to handle and use products conveniently.
(iv) Product Promotion – Packaging plays a great role in promoting products. Colour scheme, photographs, typeface etc. are used to attract attention of potential customers. The packaging is effectively used by self-service stores.
Element # 3. Labelling:
A label is the tag attached on the product which indicates important information about the product like manufacturer’s address, quantity and contents, manufacturing date, expiry date, instructions to use etc.
Labelling performs following functions:
(i) Describe the Product and Specify its Contents – Labels describe the product, its contents, usage, cautions in use etc.
For example, Johnson’s baby powder, the label will specify the date of manufacturing, expiry date, quantity, features, how to use, lot no, ingredients, manufacturer’s address, customer help line no. etc.
(ii) Identification of the Product or Brand – Labels help to identify the product or brand from other similar products of different manufacturers.
(iii) Grading of Products – Labels help to grade the products into different categories depending on the quality and features of the product.
For example, labels on ‘Pantene hair shampoo’ specify if they are for dry hair, oily hair or normal hair.
(iv) Help in Promotion of Products – Labels help in promoting products. Informative and attractive labels attract potential customers and persuade them to purchase the product. Many manufacturers have social messages, tag lines or promotional schemes mentioned on labels which attract potential customers.
‘20% extra’ on a juice pack, free toy with kinder joy chocolate, Buy one get one free’ are examples mentioned on labels which attract customers to purchase products.
(v) Providing Information Required by Law. Labels must include all the information required by law.
For example, in accordance to the provisions of law cigarette manufacturers mention statutory warning ‘Smoking is Injurious to Health’ on their labels.
(vi) Acts as a ‘Silent Salesman’. It provides all the important information to the buyer thus acts a silent salesman.
To conclude labels are an important means to communicate important product information with the potential customers and promote their sale.
Product Mix – Decisions
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 so as to expand the business and/or to increase the profitability.
Product line decisions are taken on the basis of the sales and profit of each item in the line and comparing these with the competitors’ product lines in the same markets. Marketing managers need to determine the optimal length of the product line by either adding new items or dropping existing items from the line.
In order to decide which items to build, maintain, harvest, or divest, product line managers need to assess the sales and profits and the market profile of each item:
i. Sales and Profits:
The marketer must calculate the percentage contribution of each item to total sales and profits. High concentration of sales in a few items lead to line vulnerability; however, items that show low percentage of sales and profits, and also shows less growth potential, can be eliminated.
ii. Market Profile:
The marketer must study how the product line is positioned against competitors’ lines with the use of product mapping. It helps the management in identifying different market segments and determining how well the firm is positioned to serve the needs of each segment.
After performing these two analyses, the product-line decisions can be taken on the basis of line stretching, line filling, line featuring, and line pruning.
i. Line Stretching Decision:
Line stretching means to lengthen a product line beyond its current range. The product line can be stretched downwards, upwards, or both ways (two-way).
a. Downward Stretching:
It means adding low-end items in the product line i.e. introducing a lower priced line product. Moving down-market can be fatal if the prices are not low enough to match the lower-priced competitive products.
b. Upward Stretching:
It means adding high-end items in the product line i.e. the company enters in the higher end of the market. Company goes for upward stretching in order to achieve more growth, higher margins, or to position itself as a full-line manufacturer.
c. Two-Way Stretching:
It means stretching the line in both directions. Companies that are positioned in the middle market can stretch their product lines in both directions.
ii. Line Filling:
Product line can also be lengthened by line filling i.e. adding more items within the present range of product line. Marketer goes for line filling in order to gain incremental profits, to satisfy dealers who are facing losses due to missing items in the line, to utilize excess capacity, to lead full-line Company, and/or to plug lacunas to keep out competitors.
iii. Line Featuring:
In Line featuring, the product-line manager typically selects one or few items in the line to feature. Line featuring is used for attracting customers, lending prestige, or achieving other goals. It is usually carried out if one end of line is selling well and the other end is selling poorly. The company uses featuring to boost demand for the slower sellers.
iv. Line Pruning:
Pruning means eliminating the existing products from the product line. The marketer can identifying weak items through sales and cost analysis, and prune them. Pruning can also be carried out when the company is short of production capacity or demand is slow.
Product Mix – 5 Main Strategies
Product mix is represented by its width length and depth of products. Every company has to frame its own strategy for the product-mix. Usually following areas need strategic-statements.
They are:
1. Expansion and contraction.
2. Trading up and trading down.
3. Product alteration.
4. Segmentation and Differentiation.
5. New uses for existing products.
1. Expansion:
It means addition to existing product line. Usually, an existing concern, with well-established market position can go for addition to existing product mix. Addition may be in a new product line or new product in the same line etc. It also depends upon the customers altitudes toward the products. Both are positively-related, more the demand more would be expansions.
Contraction:
It means relation in the product line. It is a drop decision. Usually, the loss making products/lines are dropped from the mix. The product -wise cost – benefited analysis is undertaken and division is taken to discontinue. Profit can be maximised by dropping a product from product-mix.
2. Trading Up:
In this case, marketer wishes to increase sales with more promotional activities. The firm takes the support of an existing product to introduce a new product. Usually the base product is low-cost and new-product is high profile product with higher price band.
Trading Down:
Here, existing high-brand product is taken as base to introduce a low-cost product. The low-cost new-product would move very fast by using the name and fame of high-profile product. In both the cases, expansion takes-place but product introduced would change.
The term ‘to alter’ means to bring change in the physical features of the product. Usually, the existing product is reshaped and introduced in market. The products colour, design, shape, size, etc., are changed and marketed. A slight modification would bring back the product in the market.
4. Segmentation and Differentiation:
Marketing segmentation means the portion of market with similarities in their features. A segment represents the special class of market. Here, products are specially added to product line to meet the unique requirements of a class.
Differentiation:
It is a non-price weapon in the hands of producer. Here, products are featured as – ‘Different – ‘Unique’ and are marketed, this differentiation is made in its colour, shape, quality, design etc.
The research and development is constantly going to suggest for the new uses for existing product. The existing products are differentiated on the new uses, mode of operation etc. Value addition is must to distinguish a product from others in its usefulness.
Some Other Strategies of Product Mix:
There are different strategies which a manager needs to decide upon regarding the product line.
They are the following:
1. Line Stretching:
Every company’s product line covers a certain part of the total possible range. Line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line down-market, up-market or both ways.
(i) Down-Market Stretch:
A Company positioned in middle market may want to introduce a lower priced line for any of the reasons like strong growth opportunities in lower priced market; tie-ups with lower-end competitors or current market stagnation.
This can be done by using parent brand name on all its offerings, for example, Sony. Also it can be done by using a sub-brand name like Denizen by Levis. Lastly it can be done by introducing a lower price offering under a different name, for example, Gap’s Old Navy brand.
(ii) Up-Market Stretch:
A company may wish to enter the higher end market to achieve more growth to realize higher margins or to simply position itself as a full time manufacturer. This should be done by introducing entirely new brand names because the customers might not give the existing brand “Permission” to stretch upwards at the time when those different lines were introduced.
(iii) Two-Way Stretch:
When the company serving the middle market decides to stretch its line in both the directions, for example – Titan has introduced Sonata for lower end segment and Titan Edge for its niche market.
2. Line Filling:
A firm can also lengthen its product line by adding more items within the present range. It is done because of various reasons which are —for utilizing excess capacity, to keep out competitors, to satisfy demands of dealers or customers etc.
3. Line Modernization:
A better and modified version of a current item in a product line is introduced. The examples could be Microprocessor Companies like Intel, Software Companies like Microsoft, Oracle, Adobe etc.
These changed versions should be timely introduced, not too early (damaging sales of current line) and not too late (competitor may introduce more advanced technology).
4. Line-Pruning:
When a manager realizes that an item is not accounting for sales and profit in a marginal manner, and is not utilizing resources thereby increasing the cost, it is better to give up such items in the product line.
Product Mix – Product Line Strategies
A company has several strategies at its disposal, with respect to the width, depth and consistency of its product mix. Most of these strategies involve a change in the product mix.
Major product line strategies are:
1. Expansion of product mix;
2. Contracting or Dropping the product mix;
3. Alteration of existing product;
4. Development of new uses for existing product;
5. Trading-up and trading-down; and
6. Product differentiation and market segmentation.
1. Expansion of Product Mix:
Expanding the line may be a valid decision if it is in an area in which consumers traditionally enjoy a wide variety of brands to choose from and are accustomed to switching from one to another; or if the competitors lack a comparable product or if competitors have already expanded into this area themselves. However, the main limitation in expansion is the availability to sufficiently finance, time and equipment.
Expansion in the present product mix may be done by increasing the number of lines and/or the depth within a line. Such new lines may be related or unrelated to the present products. For example, the large provision stores may add drugs, cosmetics and housewares (width) while at the same time increasing their assortments of dry fruits, baby foods, detergents (depth), etc.
2. Contracting or Dropping the Product Mix:
This is rather more difficult, because much money has already been invested; and, therefore, as fast as possible, products are allowed to linger on for long until they become a loss. When contraction is decided upon, various alternatives are available to the marketers. The product may be consolidated with several others in the line so that fewer styles, sizes, or added benefits are offered. Or, the position can be simplified within a line. If even then a product fails, the company may stop it altogether.
3. Alteration of Existing Product:
Sometimes experience may show that improving an existing product may be more profitable and less risky than developing and launching a new product. Alterations may be made either in the design, size, colour, texture, flavour, packaging, in the use of raw materials in the advertising appeal, or a quality may be changed. This strategy is to be followed regardless of the width and depth of the product mix.
4. Development of New Uses for Existing Product:
The company may find out new uses for the existing product as and when Sway or Surf may be used not only for washing clothes but also for cleaning the floor, utensils and glass product.
5. Trading Up and Trading-Down:
It involves an expansion of the product lines as well as the promotional strategies:
(i) Trading-up refers to the adding of a higher priced prestige product to the existing lines with the intention of increasing sales of the existing low-priced product. Under trading up, the seller continues to depend upon the older, low priced product for the major portion of the sales. Ultimately he may shift the promotional emphasis to the new product so that larger share of sales may go to the new products.
(ii) Trading-down refers to the adding of the low priced items to its line of prestige product, with the expectation that the people who cannot buy the original product may buy these new ones because these carry some of the status of the higher priced goods.
An instance on the point is that of Allwyn Company, which attempted to broaden its market for Allwyn Refrigerators by introducing five sizes in an attempt to compete at all price levels. Will cigarettes also traded down by bringing out the lower priced Wills-Flake cigarette pack.
But this type of trading-up and trading-down is harmful because the consumer may be confused about the new product and the sale in the new line is also adversely affected as it is done at the expense of the older product. This situation may be avoided by using differentiating brands, channels of distribution, promotional programmes, or product design.
6. Product Differentiation and Market Segmentation:
These strategies are often employed by the firms who wish to engage in no-price competition in markets characterised by imperfect or monopolistic competition. Since these strategies require large financial involvement in promotional efforts they are usually known as both promotional and product planning strategies.
(i) Product Differentiation:
Product differentiation involves “developing and promoting an awareness of difference between the advertiser’s product and the products of the competitors”. The strategy when used enables a company to remove itself from price competition so that it may compete on the non- price basis, viz., that its product is different from and better than, competitive models.
This differentiation is done either in quality, design, brand or packaging. Where reasonably standardised products are sold, such as soaps, cigarettes, gasoline, etc. to a broad horizontal market which is fairly homogeneous in its wants, this strategy is mostly used.
(ii) Market Segmentation:
Under market segmentation strategy, the seller knows that the total market is made of many smaller homogeneous units, each of its units has different wants, motivations, etc. To meet these different demands, different products are developed, i.e., products are tailor-made to suit these requirements.
This strategy attempts to penetrate a limited market in depth, in depth, whereas the product differentiation seeks breadth in a more generalized market. Smith observes, “The differentiator seeks to secure a layer of the market cake, where as one who employs market segmentation strives to secure one or more wedge-shaped pieces.”
Product Mix – Product Line Decision Strategies
Taking of decisions about change in product line depends upon a number of factors, such as the preferences of consumers, the tactics of competitors, the firms cost structures and the spillover of demand from one product to another, etc.
1. Changes in Market Demand:
Changes in market demand may be due to changes in the component of population served. If there is an increase in the number of births the business would like to increase new lines of baby products, such as baby food, baby shoes, perambulators, toys, etc. with other lines.
Increase in the purchasing power of the consumers also leads to the improvement in the quality of the product as also the dropping out of the line certain low-price, low quality goods.
Change in the consumer behaviour, through changes in his motivation, attitudes, preferences and buying habits may also encourage the marketing executive to expand or contract his product mix.
To satisfy the more varying needs, he may add many new lines; such as the departmental stores do by adding to the general merchandise, the light reading material, health and beauty aids, ready-to wear apparels, household requisites, indoor games, sports materials, etc.
Sometimes changes in product mix are also made to suit the requirements of the middlemen who would like to have varied line of products for reasons of competition, cost and promotion.
2. Competitive Action and Reaction:
The firm may differentiate its product line to meet price competitions, and save it from unduly low profits.
3. Marketing Influences:
New product line may be added for two reasons. First, to increase sales by exploiting new market or expanding the present ones; and second, to use the firm’s capacity more efficiently by a better use of its resources of salesmen, warehouses or branch offices.
4. Product Influences:
A firm may change its product mix to use its manufacturing capacity more effectively, thereby reducing its net production cost. New line may be added when its production has been discontinued by another firm. To make a better use of the by-products or waste products new lines may be added.
5. Financial Influences:
The firm may add or drop out product line as per its financial resources. The product mix may be expanded to increase a firm’s profitable sales volume; or a product line may be dropped to meet depression in the market.
Product Mix – Product Line vs Product Mix
When some closely related products are brought together at one place keeping in mind that they satisfy a particular class of needs, same use, being used together, being distributed through the same channels of distribution, having same technical and physical features and qualities, they form a product line. An individual product in a product line is known as a product item.
There are many product items in a product line and there are number of product lines in a product mix. Number of product lines in a product mix totally depends upon the size of the organization and nature of the products the company is producing. Almost every company starts its business with a single product and with passage of the time they form a product line.
Product line refers to a group of products that are closely related because they satisfy a class of needs, are used together, are sold to the same customer groups, and are marketed through the same type of outlets within given price changes.
The product policy decisions are made at three different levels product mix, product item and product line. These “three-in- one” elements make the product planning effective.
Product mix is the list of all products offered for sale by a company. The product mix is three-dimensional. It has breadth, depth and consistency.
Breadth is measured by the variety of products manufactured by a single manufacturer. For example, Bajaj Electricals produces a variety of electrical appliances such as – fans, lamp, etc. Depth refers to the assortment of sizes, colours and models offered within each product line.
Consistency refers to the close relationship of various product lines—either to their end use or to production requirements or to distribution channels. Bajaj Electricals, for example, produces those goods which fall under the category “electrical appliances”. So, there is consistency in their products. In contrast to this, Godrej shows inconsistency in its product line, manufacturing process and even in its channels of distribution.
Product Mix – Organisational Goals and Product Mix
The efficient fulfillment of the marketer’s goal to supply goods and services to consumer for satisfaction of their needs can be possible if due attention is given to three issues which govern the product mix—sales growth, sales stability and profits.
Sales growth can be achieved either by increasing its share in existing markets or by finding new markets. Four ways can be adopted by which product mix can by adjusted to achieve goals.
These are:
(i) Market penetration, under which market share is increased by expanding sales of present products in existing uses;
(ii) Market development under which markets are expanded by creating new uses of present products;
(iii) Product development where market share is increased by developing new products to satisfy existing needs; and
(iv) Diversification whereby market is expanded by developing new products to satisfy new consumer needs.
Sales Stability:
Stable sales allow for more efficient planning in all phases of production and distribution. It is also desirable to maintain a proper balance in total sales and product mix so that a product losing marketing may be counteracted by another selling high.
Profits are determined by the components of the product mix. Some items are usually more profitable than others. Low profit items may be performing a valuable part in helping to sell company’s more profitable product; and they may also prove as insurance against an unforeseen failure in profitable products.