4.04 EMPLOY PRODUCT-MIX STRATEGIES TO MEET CUSTOMER EXPECTATIONS.

4.04

EMPLOY PRODUCT-MIX STRATEGIES TO

MEET CUSTOMER EXPECTATIONS

1. Product Mix – Al l the types of products a company makes or se l ls

2. Product Item – A specifi c model , brand, or s ize of a product wi th in a product l ine

3. Product Line – A group of s imi lar products , made or so ld by one company

4. Width – The number of d iff erent product l ines a bus iness makes or se l ls

5. Depth – The number of i tems off ered wi thin each product l ine

6. Consistency - The degree of c loseness or re latedness between product l ines in the product mix

7. Expansion – Adding i tems to a product or an ent i re product l ine

8. Contraction – E l iminat ing an ent i re product l ine or reduce assortment wi thin i t .

9. Alteration – Improve an establ ished product wi th a new des ign, package, or uses

10.Trading Up – Adding higher pr iced i tems to a product l ine

11.Trading Down – Adding lower pr iced i tems to a product l ine

12.Positioning – Creat ing a certa in image of a product or brand in the customer’s mind

DEFINE THE FOLLOWING TERMS:

Product lines are groups of similar products offered by a company. A product line can have many or few products within.

Example: Proctor & Gamble markets over 250 products within 21 different product lines.

One product line is dish care which offers 4 products (Cascade, Dawn, Joy, and Ivory).

IDENTIFY WAYS IN WHICH PRODUCT LINES CAN BE ORGANIZED

A product mix is all the items made or sold by a company. Some companies have thousands of products offered. Some companies will try to reach all possible customers by offering more products items and product lines. The more products lines and product within a company offers refers to width and depth.

A company’s product mix has four diff erent dimensions.

Product Width Product Mix Length Product Mix Depth Product Mix Consistency

DESCRIBE PRODUCT MIX DIMENSIONS

A narrow product mix, limited product lines offered can increase the ease of management, cost effectiveness, and create simplicity and consistency.

Upstart companies usually start with a narrower product width.

It is not practical for small companies to start out with multiple product lines because of the cost involved.

IDENTIFY REASONS THAT A BUSINESS WOULD OFFER A NARROW PRODUCT MIX

A broad a product mix, offering many product lines can help attract and reach more markets and create a competitive advantage while utilizing one stop shopping.

IDENTIFY REASONS THAT A BUSINESS WOULD OFFER A BROAD PRODUCT MIX

A deep product mix, many products within a product line offers customers a variety and quantity of items to choose from.

IDENTIFY REASONS THAT A BUSINESS WOULD OFFER A DEEP PRODUCT MIX

A shallow product mix, limiting products within a product line can be cost effective and easy to manage while still reaching a market.

IDENTIFY REASONS THAT A BUSINESS WOULD OFFER A SHALLOW PRODUCT MIX

Businesses must plan their product mix carefully because they cannot offer all the products that customers want.

If offering a large product mix, there should be a degree of consistency to the products offered so that the mix is profitable for the company.

EXPLAIN THE IMPORTANCE OF A BUSINESS’S PRODUCT MIX

Adding items to a product line or introducing an entire product line can capture market share and meet customer’s needs and wants.

DESCRIBE ADVANTAGES OF EXPANSION PRODUCT-MIX STRATEGIES

Adding items to a product line or introducing an entire product line can be expensive, be difficult to manage, and not always be successful.

DESCRIBE DISADVANTAGES OF EXPANSION PRODUCT-MIX STRATEGIES

Deleting products from a product line or the entire product line can be cost effective and easier to manage while creating simplicity and consistency.

DESCRIBE ADVANTAGES OF CONTRACTION PRODUCT-MIX STRATEGIES

Deleting products from a product line or the entire product line is giving away market share to your competitors.

It may be wiser to improve the existing product or line to recapture market share.

DESCRIBE DISADVANTAGES OF CONTRACTION PRODUCT-MIX STRATEGIES

Improving an established product can capture new customers and meet customer’s unmet wants as trends change.

Ex: McDonald’s opening stores in India

DESCRIBE ADVANTAGES OF ALTERATION PRODUCT-MIX STRATEGIES

Improving an established product is expensive and not always a success.

Example: New Coke

DESCRIBE DISADVANTAGES OF ALTERATION PRODUCT-MIX STRATEGIES

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.

DESCRIBE ADVANTAGES OF TRADING UP PRODUCT-MIX STRATEGIES

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.

DESCRIBE DISADVANTAGES OF TRADING UP PRODUCT-MIX STRATEGIES

Adding lower priced items to a product line of expensive products can capture a lower income market who cannot afford the higher priced items.

DESCRIBE ADVANTAGES OF TRADING DOWN PRODUCT-MIX STRATEGIES

Adding lower priced items to a product line of expensive products can hurt the image and sales of the higher priced items in the line.

DESCRIBE DISADVANTAGES OF TRADING DOWN PRODUCT-MIX STRATEGIES

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.

DESCRIBE ADVANTAGES OF POSITIONING PRODUCT-MIX STRATEGIES

Images of a product are difficult to change once they are established and very expensive.

DESCRIBE DISADVANTAGES OF POSITIONING PRODUCT-MIX STRATEGIES.

Determine which products will produce the highest increase in profits and revenue for the company.

See speaker’s notes.

DESCRIBE CONSIDERATIONS IN SELECTING PRODUCT-MIX STRATEGIES

Use of technologyAn online business would minimize the expenses and up-keep of a building.

Technology allows consumers to order and/or design products online and have it shipped directly to their home, minimizing inventory and labor.

Using a website to advertise is less expensive that advertising in a newspaper, television or mailings.

IDENTIFY FACTORS THAT CAN MINIMIZE COSTS IN DEVELOPING A PRODUCT MIX

Some basic product-mix decisions include:

(1) Review existing product lines.(2) Adding new lines and/or deleting existing lines. (3) Compare new versus existing product lines.

(4) Compare internal development versus external acquisition in the product mix. (Do you want to make it yourself or buy it from another company for resale.)

(5) Determine the eff ects of adding or deleting a product line in connection to other lines in the product mix

(6) Estimate the eff ects of future change on the company's product mix.

EXPLAIN GUIDELINES FOR PLANNING A PRODUCT MIX

4.04THE END