How can a company build and manage its product mix and product line?

Setting Product Strategy

How can a company bui ld and manage i t s product mix and product l ine?

Presentation byDivyasree P K

IIT Madras

Productmixmix

N. Set of all products that a company offers for sale

Product mix comprises of multiple

PRODUCT LINES

N. Set of all related products manufactured by same company

Cigarettes Agarbattis

Lifestyle retailing HotelsDeodorants

Stationery & EducationFoodPersonal wash Food

P r o d u c t l i n e s

WIDTH

No. of different product lines in a company-----------------------------------------------------------DepthDepth

No. of variants of each product

CONSISTENCy

Extent of similarity within the product lines in terms of end use, production , distribution, etc

Product Line AnalysisCrucial to manage the product lines

1. Sales & Profits

2. MarketProfile

contribution

1. Sales & Profits

HigherProducts with

contributionHigher SalesProfits

Requires careful monitoring and protection

1. Sales & Profits

Products with low sales and profits and lower growth potential and lower growth potential SHOULD be dropped

2. MarketProfile

How the product lines fare in the market scenario

…Competition.Expansion avenues

&

Employ Product Maps to identify…

&Market Segments…

…And decide about Product Line Length & Product Mix Pricing

Product Line LengthNew linesNew linesStretching old linesFilling old linesOptimization

New Product Line

New lines to induce UP SELLING

New lines to induce CROSS SELLING

Divers i fy ing across mul t ip le economic segments to reduce r i sk f rom a vo lat i l e economy

Product Line Stretching

Increase the range

Down-market stretching

Movement from

middle to low marketmiddle to low market

WHY 1. Growth potential

2. Attack low-end competitors

3. Stagnating middle market

CautionAdopt appropriate strategy & pricing to prevent cannibalization

Up-market stretching

Movement to upper market

WHY 1. Growth potential

2. Higher margins

3. Positioning as full-line manufacturers

Two-way stretching

Titan Sonata Titan Exacta Titan Royale

Product Line Filling

New products within the current range

WHY 1. Incremental profits

2. Keep out the competition

Caution 1D o n o t o v e r d oElse r i sk cannibal izat ion & cus tomer confus ion

Caution 2Dif ferent iat ion wi th N O T I C E A B L E R E L A T I V E di f ference

Caution 3A C T O N M A R K E T N E E D , no t in ternal need

Brand Portfolio OptimizationOptimization

Continuous modernizationSelective featuringRational pruning

Microsoft and Intel continuously introduce advanced versions of introduce their products

CautionTime the product re leases appropr iate ly

N E I T H E R L A G , N o r B E Q U I C K

Feature

Low-priced product to attract customers

High end product to add prestigeHigh end product to add prestige

Good brand to offset loss from a weak one

90% profit from 25% of the brands. Hence..

75% Brand pruning by UNILEVER in 2003

Product Mix PricingProduct l ine pricingOptional feature pricingCaptive product pricingCaptive product pricingTwo part pricingBy product pricingProduct bundling pricing

Product Line Pricing

Progressively different prices for different brands of the same product

line

Optional Feature Pricing

Core product available relatively lower rate

Additional features available on extra

payment

Captive Product Pricing

Captive product

crucial to the functioning of main product

available at a premiumavailable at a premium

Main product

at low rates

Two part Pricing

Fixed PLUS Variable costs

By-Product Pricing

Value of by-product derived from the main product to facilitate lower prices for main product

Tar prices linked to that of oil

Product Bundling Pricing

Pure Bundling

Only BlueDartcartons are allowed

Mixed Bundling

Combo packet of a shampoo and cartons are allowed

for packaging if one chooses to use their courier service

shampoo and conditioner costs less than the sum of individual components