PRODUCT STRATEGY

PRODUCT MIX, PRODUCT LINES AND PRODUCT STRETCHING

Introduction

Businesses are continuously making critical decisions about their product range. Product decisions will include whether to develop new products and how to manage existing products. This article is about the different ways firms manage the type and number of products they sell and related terms.

Product Mix (Product Portfolio or Product Assortment)

The Product mix is the total variety of products a firm sells. Some firms will sell just one product, whilst others will sell a large number of different products. For example Samsung's product mix includes mobile phones, netbooks, tablets, televisions, fridges, microwaves, printers and memory cards. Firms should select their product mix carefully as they will need to generate a profit from each of the products in the product mix.

Product Line

Firms may decide to split their product mix into groups known as product lines. A product line is a number of products grouped together based on similar characteristics. The characteristic used to split products, will depend on the firm and its product strategy. They include product price, product quality, who the product is aimed at (target group), and product specification/features. For example Samsung's mobile phones are divided into product lines based on the following features; touch screens, slider/folders, QWERTY keyboards and bar phones. Product lines help firms manage their products as product strategy can be designed around product lines. This is useful if the firm has a large product mix as there is less need to concentrate on individual product type strategy.

Product Line Length

The product line length shows the number of different products in a product line. A long product line has lots of different products in it and a short product line has a small number of different products. The product manager's job is to work out how many products to include in the product line. If there are too many product types in a product line, they will begin to compete with each other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer choice and send customers to competitors with a greater selection of products.

 Product Line Depth

Some of the product types in a product line may be split again into groups, the product line depth shows how many subgroups the product line contains. For example Samsung have split their mobile phones into the following product lines touch screens, slider/folders, QWERTY keyboards and bar phones. Each of these product lines can be further split into subgroups at the time of writing this article Samsung had 7 slider mobile phones and 32 touch screen mobile phones, 32 is a deep product line.

Product Line Stretching

Product line stretching occurs when a business adds new product to the product line and the new product types are of a higher or lower quality than existing products in the product line. If the new product types are cheaper or of a lower quality it is known as a downward stretch. If the new product types are more expensive or of a higher quality it is known as an upward stretch. Supermarkets often stretch product lines by offering value, standard and premium versions of their own brand products. Product stretching enables firms to fill any Gaps they have identified in the market.

Product Mix Width

The product mix width is the number of product lines in the product mix. A wide product mix increases the type of customers a firm can target. However it may involve a lot of work as each product line will require a strategy and management. It could also reduce specialisation as it is difficult to offer every variant of a product type if you are selling lots of different types of product. A narrow product mix may be easier to manage and allow the firm to specialise in particular product lines and product types. However a small product mix reduces the type of customers a firm can target as they can't cater for everyone's product "needs and wants".

Conclusion

Product selection is an important decision as the product is the item you are selling. Firms need to strike a balance between giving customers choice and trying to cater for everybody by stocking too many products. Dividing products into product lines and the product line into further groups, helps firms to develop product strategies. It will also help them identify which product ranges sell well and which do not as each product line will be monitored.

Marketing Glossary 

1.     AIDA model of communication:  A communication model which aims to obtain Attention, Interest, Desire and Action.

2.     Advertising objective:  The objective of your communication strategy. To inform of a new development, persuade or remind.

3.     Benefit:  The gain obtained from the use of a particular product or service. Consumers purchase product/services because of their desire to gain these built in benefits.

4.     Benefit Segmentation:  Dividing  a market according to the benefit they seek from a  particular product/service.

5.     Brand name:  Used for the identification of goods or services. Can be a name, term, sign or symbol.  A well managed brand should uphold certain values and beliefs.

6.     Brand extension strategy: The process of using an existing brand name to extend on to a new product/service e.g. The application of the brand name Virgin on a number of business activities.

7.     Break-even:  A point for a business where turnover is equivalent to all costs.

8.     Cash cow: A product/service which generates cash for the business, used to finance other areas of the organisation.

9.     Competitive Advantage: Offering a different benefit then that of your competitors.

10. Competitor Analysis:  Process of understanding and analysing a competitors strengths and weaknesses, with the aim that an  organisation will find a competitive positioning difference within the market.  

11. Competition pricing:  Setting a price in comparison with competitors.

12. Concept testing: Testing the idea of a new product or service with your target audience.

13. Brand repositioning: An attempt to change consumer perceptions of a particular brand. For example VW has successfully repositioned the Skoda brand.

14. Data mining: Application of artificial intelligence to solve marketing problems and aiding forecasting and prediction of marketing data.

15. Dichotomous question:  Questions which limit the responses of the respondent eg YES/NO.

16. Direct marketing: The process of sending promotion material to a named person within an organisation.

17. Diversification:   A growth strategy which involves an organisation to  provide new products or services. The new products on offer could be related or unrelated to the organisations core activities.

1.     Demography: A study of the population.

2.     Demographic segmentation. Dividing the population  into age, gender, income and socio-economic groups amongst other variables..

3.     Early Adopter: Those who adopt a product/service in the early stages of its lifecycle.

4.     Early Majority: Those who adopt a product/service after it has been established and excepted as the standard. 

5.     Engels Law: Suggest that peoples spending patterns change as their income rises.

6.     Exclusive distribution: Limiting the distribution of a product to particular retail store to create an exclusive feel to the brand/product.

7.     Econometric modeling: Application of regression techniques in marketing analysis

8.     Focus Group:   A simultaneous interview conducted amongst 6-8 respondents.  The aim is to obtain qualitative information on the given topic. 

9.     Geographic segmentation: Dividing the market into certain geographic regions e.g. towns, cities or neighborhoods.

10. Innovator:  Those consumers who are the first to adopt a product/service at the beginning of its lifecycle. They are usually willing to pay a premium to have the benefit of being the first.

11. Intensive distribution: Distributing a product to as many retail outlets as possible.

12. Laggards:  Those consumers who adopt the product/service as it reaches the end of its lifecycle. They usally pay a competitive price for the benefit of waiting.

13. Lifestyle segmentation:  Analyzing consumers activities, interest and opinion (AIOs) to develop a profile on the given segment.

14. Market Development Strategy: Selling an existing product/service in a new and developing market. 

15. Mass marketing: The promotion of a product or service to all consumers.

16. Marketing Mix:  The strategy of the organisation consisting  of products, price, place and promotion strategy (also known as the 4p's).  

17. Marketing Planning:  A written document which plans the marketing activities of an organisation for a given period. The document should include an environmental analysis, marketing mix strategies and any contingency plans should an organisation not reach their given objectives.

18. Market position: The perception of a product or an organisation from the view of the consumer.

19. Market research:  Analysing and collecting data on the environment, customers and competitors for purposes of  business decision making.

20. Modified Rebuy:  Where an organiation has to make changes to a  specific buying situation.

21. New buy:  Where an organisation faces the task of  purchasing a new product/service.  

22. Niche marketing: The process of concentrating your resources and efforts on one particular segment

23. Objective to task method:  Setting a advertising budget based on the desired goals of the communication campaign.

24. Open ended questions:   Questions which encourage the respondent to provide their own answers.

25. Paretos Law (80/20) :  A rule which suggests that 80% of an organisations turnovers is generated from 20% of their customers.

26. Penetration pricing: A pricing strategy where the organisation sets a low price to increase sales and market share.

27. Perceptual map:  Mapping a product/organisation alongside all competitors in the hope to find a ' positioning gap' in the given market.

28. Personal selling: Selling a product or services one to one. 

29. Primary data:  The process of organising and collecting data for an organisation.

30. Product Development Strategy:  The development of a new product/service aimed at the organisation existing market.  The aim is to increase expenditure within the segment.

31. Product Life Cycle: The life stage of a product,  includes,  introduction, growth, maturity and decline.

32. Product Cannibalisation: Loosing sales of a product to another similar  product within the same product line.

33. Public relations:  The process of  building good relations with the organisations various stakeholders. 

34. Relationship marketing: Creating a long-term relationship with existing customers. The aim is to build strong consumer loyalty.

35. Sales promotion:  An incentive to encourage the sale of a product/service e.g. money off coupons, buy one, get one free.

36. Secondary data: Researching information which has already been published.

37. Segmentation: The process of  dividing a market into groups that display similar behaviour and characteristics.

38. Skimming pricing:   A pricing strategy where an organisation sets an initial high price and  then slowly lowers the price to make the product available to a wider market.

39. Straight Rebuy: Where an organisation reorders without modification to the specification.

40. SWOT analysis: A model used to conduct a self appraisal of an organisation. The model looks at internal strengths and weaknesses and external environmental opportunities and threats.

41. Test marketing: Testing a new product or service within a specific region before national launch.

42. Usage segmentation: Dividing you segment into non, light, medium or heavy users.