Product Mix Strategies

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					Product-Mix Strategies

  Prof. Rushen Chahal
Product Mix and
Product Line
 The product mix is the set of all products
  offered for sale by a company.
 A product mix has two dimensions:
    ◦   Breadth - the number of product lines
        carried.
    ◦   Depth - the variety of sizes, colours, and
        models offered within each product line.
   A product line is a broad group of products,
    intended for similar uses and having similar
    characteristics.
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Product Mix - An Example
                       BREADTH (DIFFERENT LINES)
               Lawn mowers  Gardening tools Lawn furniture

               Power rotary        Rakes         Chairs

            Power reel         Hoes           Chaise lounges

       Hand-powered      Shovels           Benches
                                          Various sizes
                                        and prices in
                                     redwood or
  Each in various   Each in various aluminium with
sizes and prices sizes and prices plastic webbing




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Product Mix Strategies
Positioning the Product
  •In Relation to a Competitor
  •In Relation to a Product Class or
    Attribute
  •In Relation to a Target Market
  •By Price and Quality
Product-Mix Expansion
  •Line Extension
  •Mix Extension
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Expanding the
Product Mix
 Mix-extension strategies include:
  ◦   Same brand, related product (Tim Horton
      coffeemaker)
  ◦   Same brand, unrelated product (Swiss
      Army watch)
  ◦   Different brand, unrelated product (Pepsi
      & KFC)
  ◦   Different brand, related product (P&G
      adds Luvs diapers; already makes Pampers)

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Trading Up and
Trading Down
    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.

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Other Product
Mix Strategies

    Alteration of Existing Products:
     ◦ Improve an established product with new
       design, new package, new uses.
    Product-Mix Contraction:
     ◦ Eliminate an entire line or reduce assortment
       within it.
     ◦ Pruning to reduce similar brands.
     ◦ Dump unprofitable or indistinct brands.


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The Product
Life Cycle
   the concept of the product life cycle applies to
    product categories, not to brands; it is related to
    the concept of diffusion of innovation
   different products will have differently-shaped life
    cycle curves; will diffuse at different rates
   a product is normally perceived to pass through
    four stages over its life cycle; introduction,
    growth, maturity, and decline
   each stage requires different marketing strategies


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Product Life
Cycle Stages
  Introduction—most risky and expensive.
  Growth—both sales and profits rise, often
   rapidly.
  Maturity—sales increase at a decreasing
   rate and profits decline.
  Decline—demand drops, often because of
   another product development.


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Product Life Cycle Curve
            INTRODUCTION   GROWTH   MATURITY       DECLINE



                                    Sales Volume
  Dollars




                                    Profit


  0
Loss
                              Time in years


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Strategic Implications
of the Stages
   introductory stage: developing the market,
  creating awareness, reaching the innovators
 growth stage: competition begins, sales grow
  quickly, profits peak, market penetration
 maturity stage: competition is intense, sales
  slow down, differentiated product offerings,
  customers are brand loyal, few new entrants
 decline stage: customers move to other
  options, competitors leave, profits are low,
  consider exit

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Characteristics of
Life Cycles
   length of the life cycle will vary across markets;
    some are quite short and may be getting shorter
   some fads have very short life cycles, while other
    products stay at maturity for years
   in high-tech markets, life cycles are very short
   some products do not make it through all four
    stages; they may fail in introduction
   the life cycle must be considered in relation to a
    specific market; stage may vary across markets



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Managing the
Life Cycle
Successful life-cycle management requires
predicting the shape of the curve and then
successfully adapting strategies at each stage.
 when to consider entering the market
 how to manage to capitalize on growth
 it is possible to develop strategies that will
  extend the maturity stage; modify the product,
  devise new uses, or design new appeals
  ◦ greatest challenge comes at the decline stage which
    may result in product abandonment

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 Different Life Cycles
             Part a - Extended                      Part b - Fad
Aggregate

             introduction stage
  sales




                          Time in years                 Time in years


             Part c - Indefinite
 Aggregate




             maturity stage
   sales




                                    Time in years
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 Planned Obsolescence
 Fashion and Style
Planned Obsolescence: Style:
  ◦ Technological or           ◦ A distinctive manner of
    functional                   construction or
    obsolescence; other          presentation in any art,
    things do it better          product or endeavour.
    now.                      Fashion:
  ◦ Style obsolescence: Still  ◦ Any style that is accepted
    serviceable, but looks       and purchased by
    out of date now.             successive groups of
                                 people over a long period
                                 of time.
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Fashion-Adoption Process
   Series of buying waves as a given style is popularly
    accepted by one group after another.
   Three theories of fashion adoption:
    ◦ Trickle-down—a given fashion flows down
      through several socioeconomic levels.
    ◦ Trickle-across—the fashion moves horizontally
      and simultaneously within several
      socioeconomic levels.
    ◦ Trickle-up—a style first becomes popular at
      lower levels and then flows upward.

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      Fashion Adoption Theories in Action
Product    Product introduced at same time
offered    in all three types of stores:
first to
upper      TRICKLE-ACROSS
socio-     Exclusive high-priced
           specialty stores
economic   (boutiques)
group                                        TRICKLE-
                                                UP
           TRICKLE-ACROSS
           Medium-priced department
TRICKLE-   stores and specialty stores       Product
 DOWN
                                             adopted
                                             first by
                                             lower
           TRICKLE-ACROSS
           Discount stores
                                             socio-
                                             economic
                                             group
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posted:2/15/2012
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Description: Prof. Rushen notes for MBA and BBA students