Product Mix concepts, Product Classification. Product Planning: Marketing Plan, Portfolio Analysis, Market Potential and forecasting PRODUCT CONCEPTS Product Mix Product mix • The product mix is the full list of all products offered for sale by a company. • A product mix has two major dimensions • Breadth (Width) - Different lines. • Depth - Assortment within a line. – A product line is a broad group of products, intended for essentially similar uses and possessing reasonably similar physical characteristics DIMENSIONS • WIDTH = number of product lines carried by a company. – NARROW = offering a limited number of product lines – BROAD = many different product lines carried • DEPTH = number of products and the assortment of sizes, colors, and models offered in a product line – SHALLOW = limited variety within a product line – DEEP = extensive variety within a product line Product Mix PRODUCT MIX BREADTH The number of product lines carried DEPTH Variety of sizes, colors, models within a product line Product Width The number of different product lines a business manufactures or sells. Width of the Gillette Product Mix Oral Care Blades & Razors Personal Care Batteries Appliances Product Depth The number of product items offered within each product line. Oral Care Blades & Razors Personal Care Batteries Appliances NARROW PRODUCT MIX = Limited product lines carried, typically very specialized. A description of the width of a business's product mix offering a limited number of product lines. Broad Product Mix = Many different product lines carried. A description of the width of a business's product mix offering many product lines. Shallow Product Mix = Limited variety within a product line. A description of the depth of a business's product mix offering few items in the product line. Deep Product Mix = Extensive variety within a product line. A description of the depth of a business's product mix offering a great many items in the product line. Identify reasons that a business would offer a narrow product mix. • Product Width – number of different product lines • CONTRACTING - Pruning weak brands can strengthen the remaining brands in the line. – – – – Ease on management Cost effective Simplicity Consistency Identify reasons that a business would offer a broad product mix. • Product Width – number of different product lines • EXPANDING – Reach all markets – Competitive advantage – Ex: Red Lobster specializes in seafood, but offers chicken and steak to broaden their product mix. Identify reasons that a business would offer a deep product mix. • Product Depth – number of items offered within each product line • EXPANDING – Variety – Quantity Ex: Kohl’s carries various quantities of sizes, colors, & styles of Levi Jeans. Identify reasons that a business would offer a shallow product mix. • Product Depth – number of items offered within each product line • CONTRACTING – Cost effective – Satisfy small markets – Ex: Only 2 chicken items on Red Lobster’s menu. REVIEW: What are some key product mix strategies? Product-Mix Strategies Expansion Alteration of existing products Contraction Trading Up and Trading Down Explain the importance of a business’s product mix. • Businesses must plan their product mix carefully because they cannot offer all the products that customers may want. • They should be a profitable market for product offered by a company How do businesses determine which products to produce and sell? • Businesses will use different product mix strategies to determine what to produce or sell. • Product mix strategies depend on: – Resources – Objectives – Past and current sales – Consumer trends Product Mix Strategies • The plan for how the business determines which products it will make or stock • May develop completely new products • May expand or modify their current product lines • May drop existing products EXPANSION Developing New Products • Generating Ideas – Come from a variety of sources – Creativity is essential • Screening Ideas – Ideas are evaluated and matched against the company’s overall objectives. Developing New Products (cont.) • Developing a Business Proposal – Consider a product’s potential sales, costs, and production requirements. • Developing the Product – The new idea takes physical shape – Marketers develop a marketing strategy. • Testing the Product with consumers Developing New Products (cont.) • Introducing the Product – The product has been researched successfully – This stage also is called commercialization. • Evaluating Customer Acceptance – Marketers track new product performance. EXPANSION ADVANTAGES DISADVANTAGES • Extend product lifecycle • Adding items to a product line or introducing an entire product line can be expensive, be difficult to manage, and not always be successful. • Adding items to a product line or introducing an entire product line can capture market share and meet customer’s needs and wants. Deleting a Product or Product Line • • • • • • Obsolescence Loss of appeal Conflict with current company objectives Replacement with new products Lack of profit Conflict with other products in the line CONTRACTION ADVANTAGES DISADVANTAGES • Cut losses • Reallocate resources to more profitable products • Deleting products from a product line or the entire product line can be cost effective and easier to manage while creating simplicity and consistency • Deleting products from a product line or the entire product line is conceding market share to your competitors. • It may be wiser to improve the existing product or line to recapture market share. Describe alteration product-mix strategies. • Alteration of Existing Products: – Making changes to meet customer needs & wants – Improve an established product with new design, new package, new uses. • Ex: Jeep offering 4 doors Developing Existing Products (ALTERATION) • Companies constantly review their product mix to see if they can further expand their product lines or modify existing products. • Two ways to do this: Developing Existing Products (cont.) Line Extensions – new product lines, items, or services Original Product Newer Products Developing Existing Products (cont.) Product Modifications – an alteration in a company’s existing product ALTERATION ADVANTAGES DISADVANTAGES • Improving an established product can capture new customers and meet customer’s unmet wants as trends change. Ex: McDonald’s opening stores in India • Improving an established product is expensive and not always a success. Example: New Coke Product Mix Strategies • Developing New Products – Follows seven steps: • Generate Ideas • Screen Ideas • Develop a Business Proposal • Test the product with consumers • Introduce the product • Evaluate customer acceptance Product Mix Strategies (cont) • Developing Existing Products – Line Extensions: Adding new product lines, items or services. • Ex: Tylonol – Product Modifications: An alteration to an existing product: • New and different varieties • Formulations • Colors • Styles • Features • Sizes Product Mix Strategies (cont) • Deleting a Product or Product Line – Obsolescence – Loss of Appeal – Changes in Company Objectives – Replacement with New Products – Lack of Profit – Conflict with other products in the line Describe trading up / down product-mix strategies. • Trading up: Adding a higher-priced product to a line to attract a higher-income market and improve the sales of existing lower-priced products. • Trading down: Adding a lower-priced item to a line of prestige products to encourage purchases from people who cannot afford the higher-priced product, but want the status. TRADING UP ADVANTAGES DISADVANTAGES • Adding higher priced items to a product line will attract the higher income market and may help increase the image and sales of the lower priced items. • • • • While sales may be generated for the new product or line, sales of established products may decline. If the business uses trading up to enhance its image, 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, or they may refuse to believe that better quality merchandise can be purchased from a business that had formerly sold budget goods. Adding higher priced items to a product line is expensive and may not attract new customers while hurting the image and sales of the lower priced items. TRADING DOWN ADVANTAGES DISADVANTAGES • Adding lower priced items to a product line of prestige products can capture a lower income market who cannot afford the higher priced items. • • • • • • Adding lower priced items to a product line of prestige products can hurt the image and sales of the higher priced items in the line 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. Dealers may not be willing to add the lower priced product to their offering. Competition may become stronger at the high end of the market. Gaining short-term sales at the expense of long term sales How are products/services positioned in the market place? POSITIONING is about bringing attention to products and DIFFERENTIATING them from similar ones. Positioning the Product COMPETITOR Differential advantage PRODUCT CLASS OR ATTRIBUTE Associated with attractive attribute PRICE AND QUALITY High price/high quality or low price Product Positioning = the IMAGE a product projects • The goal is to set the product apart from the competition. • “The way you get into your customer’s mind.” • The efforts a business makes to identify, place, and sell its products. Describe positioning product-mix strategies. • Positioning – is all about perception; actions marketers take to create a certain image of a product in the minds of the customers • • • • • In Relation to a Competitor In Relation to a Product Class or Attribute In Relation to a Target Market By Price and Quality Difficult to change Product Positioning • Product positioning: Efforts a business makes to identify, place and sell its products in the marketplace. – Positioning by price and quality: • Ex: Ford Motor Company positions its Focus as an economical passenger car while still emphasizing quality. Positioning by Price & Quality • Offer economy, mid-priced, and luxury lines Product Positioning (cont) – Positioning by features and benefits: • Ex: Oil of Olay was positioned as a premium facial moisturizer and cleanser to keep skin soft and young. – Positioning by unique characteristics: • Ex: Cell phones that can text message or take pictures and send them. Positioned by Features & Benefits • Unique characteristics Product Positioning (cont) – Positioning in relation to the competition: • Ex: Warner-Lambert Company introduced Cool Mint Listerine by positioning against the “theraputic” benefits of Original Listerine and the “cosmetic” benefits of Scope. – Positioning in relation to other products in a line: • Ex: Binney & Smith introduced washable crayons and positioned them as a specialty item in the company’s Crayola crayon line. Positioning in Relation to the Competition Positioning in Relation to Other Products in a Line POSITIONING STRATEGIES ADVANTAGES DISADVANTAGES • Creating an identity of a product helps find a place for the product in the marketplace while strongly identifying with a specific target market and possibly creating brand loyalty. • Images of a product are difficult to change once they are established and very expensive. 6 Steps to Successful Positioning 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want. 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set? MAJOR PRODUCT MIX STRATEGIES • • • • • • • • Expansion of Product Mix Breadth - Mix extension. Depth - Line extension. Contraction of Product Mix Breadth Depth Alteration of Existing Products Positioning the Product – Position is the image that the product projects in relation to competitive products and to other products marketed by the company.
