09 - product mix strategies

Principles of Marketing

Chapter 09

PRODUCT MIX STRATEGIES

Product Mix and Product Line

Product Mix

The product mix is the set of all products offered for sale by a company.

A product mix has two dimensions: Breadth – different types of products on the bases of uses

and characteristics offered OR the number of product lines carried.

Depth - the variety of sizes, colors, and models offered within each product line.

Product Line

A product line is a group of products within the product mix (made by the same company) that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.

Product Mix Depth and Breadth (Unilever Pakistan)

Breadth: Different Lines

De

pth

: Ass

ortm

ent w

ithin

a lin

e

Ice Cream Beverages Food Dental Shampoo Skin Care Home Care Deserts

Product Mix Strategies

vs


1. Positioning the ProductsMarketers can choose from a variety of positioning strategies.

a. Positioning in relation to competitors

Pakistan Cables


b. Positioning in relation to product attribute

micro cleaning system


c. Positioning in relation to price/quality

Better Quality Low Price

Product Mix Strategies2. Product Mix ExpansionThere are two types:

a. Line Extension – When a company adds a similar item into an existing line of products. For example LU adding three new flavors to its Prince biscuit brand.

b. Mix Extension – When a company adds a new product line to its existing assortment of products. For example Unilever adding a line of deodorants to its existing products. The new line may be related or unrelated to the current products. Also the company can use an existing brand name or a new brand name as in the case of Dove Soap and Dove shampoo.


3. Alteration of Existing ProductsImproving an existing product is more profitable and less risky than

developing a completely new product. Alteration may sustain its appeal or may initiate its rebirth.


4. Product Mix ContractionThis strategy is carried out by either by eliminating an entire line or by simplifying

the assortment within a line. The idea is to maintain higher profits through fewer products.

Product Mix Strategies5. Trading Up and Trading Down

Trading up means adding a higher price product to a line in order to attract a broader market. The new products prestige may positively impact existing product’s sales.

Trading Down means adding a low price product to a company’s product line. Company expects that people who can’t afford the expensive version will buy the low-price version. The lower price version carries some of the status and some of the other more substantive benefits of the higher-price version.

Traded-down

Traded-up

Further Traded-up

1

32

Product Life Cycle (PLC)

PLC

Product Life Cycle shows the path a typical new product takes from its inception to its discontinuation. In other words, it describes the stages a product goes through from its introduction, through its growth until it is mature and then finally its decline.

Stages of PLC

Stage I: Introduction (pioneering stage) The introduction phase is when the public first sees or hears about a

product. The product appears in stores for the first time, and people start seeing print and television ads.

During this phase, a company may either choose to set prices high in order to cover initial expenses that went into producing the product or to cash in the hype and anticipation of the new technology or the company may introduce the product with basic features at reduced prices in hopes of gaining lots of new customers.

The pioneering firm has to take the burden of promoting the product category instead of just a brand.

This stage is most risky and expensive. Many products fail at this stage. Adopted by innovators

Stages of PLCSalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

LowLow

High cost per customerHigh cost per customer

NegativeNegative

Create product awareness and trialCreate product awareness and trial

Offer a basic productOffer a basic product

Use cost-plus formulaUse cost-plus formula

DistributionDistribution Build selective distributionBuild selective distribution

PromotionPromotion Heavy to entice product trialHeavy to entice product trial

Stages of PLC

Stage II: Growth (market acceptance stage)

Sales and profits rise at an increasing rate Competitors enter the market Too many competitors may reduce the prices & shrink the margins For increased sales, distribution is expanded. Adopted by early adopters

Stages of PLC

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

Rapidly risingRapidly rising

Relatively Reduced cost per customerRelatively Reduced cost per customer

RisingRising

Maximize market shareMaximize market share

Offer extension, service, warrantyOffer extension, service, warranty

Reduce PricesReduce Prices

DistributionDistribution Build intensive distributionBuild intensive distribution

PromotionPromotion Reduce to take advantage of demandReduce to take advantage of demand

Stages of PLC

Stage III: Maturity During first part of the maturity, sales increase at a decreasing rate. Later at maturity, the sales level off (stagnation). Profits starts o decline in the beginning of this stage and diminish

later due to excessive price competition and large number of competitors.

Eventually the market reaches point of saturation. Most of early majority customers and late majority customers adopt

the product in this stage. To prevent the product, firms offer extensions and try to differentiate

their products. They also design new promotions and new uses of the same product.

Stages of PLC

SalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

PeakPeak

Low cost per customerLow cost per customer

High but begin to declineHigh but begin to decline

Maximize profits while defending market shareMaximize profits while defending market share

Diversify brand and models (Differentiation) Diversify brand and models (Differentiation)

Match or best competitorsMatch or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

PromotionPromotion Increase to encourage brand switchingIncrease to encourage brand switching

Stages of PLC

Stage IV: Decline For some products, decline is inevitable…

type writer vs word processor board games vs video games tube lights vs energy saver (vs LEDs)

Stages of PLCSalesSales

CostsCosts

ProfitsProfits


ProductProduct

PricePrice

DecliningDeclining

Low cost per customerLow cost per customer

DecliningDeclining

Reduce expenditures and milk the brandReduce expenditures and milk the brand

Phase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Selective: phase out unprofitable outletsSelective: phase out unprofitable outlets

PromotionPromotion Reduce to minimum levelReduce to minimum level

09 - product mix strategies

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