Product Mix Decisions

An organization with several product lines has a product mix. A product mix (or product portfolio) consists of all the product lines and items that a particular seller offers for sale. For example, Colgate-Palmolive is perhaps best known for its toothpaste and other oral care products. But, in fact, Colgate is a $17.3 billion consumer products company that makes and markets a full product mix consisting of dozens of familiar lines and brands, Colgate divides its overall product mix into four major lines: oral care, personal care, home care, and pet nutrition. Each product line consists of many brands and items.

A company's product mix has four important dimensions: width, length, depth, and consistency. Product mix width refers to the number of different product lines the company carries. For example, Colgate markets a fairly wide product mix, consisting of dozens of brands that constitute the "Colgate World of Care"-products that "every day, people like you trust to care for themselves and the ones they love." By contrast, GE manufactures as many as 250,000 items across a broad range of categories, from lightbulbs to medical equipment, jet engines, and diesel locomotives.

Product mix length refers to the total number of items a company carries within its product lines. Colgate carries several brands within each line. For example, its personal care line includes Softsoap liquid soaps and body washes, Irish Spring bar soaps, Speed Stick deodorants, and Skin Bracer, Afta, and Colgate toiletries and shaving products, among others. The Colgate home care line includes Palmolive and AJAX dishwashing products, Suavitel fabric conditioners, and AJAX and Murphy Oil Soap cleaners. The pet nutrition line houses the Hills and Science Diet pet food brands.

Product line depth refers to the number of versions offered of each product in the line. Colgate toothpastes come in numerous varieties, ranging from Colgate Total, Colgate Optic White, and Colgate Tartar Protection to Colgate Sensitive, Colgate Enamel Health, Colgate PreviDent, and Colgate Kids. Then each variety comes in its own special forms and formulations. For example, you can buy Colgate Total in regular, clean mint, advanced whitening, deep clean, total daily repair, 2in1 liquid gel, or any of several other versions.

Finally, the consistency of the product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way. Colgate's product lines are consistent insofar as they are consumer products that go through the same distribution channels. The lines are less consistent insofar as they perform different functions for buyers.

These product mix dimensions provide the handles for defining the company's product strategy. A company can increase its business in four ways. It can add new product lines, widening its product mix. In this way, its new lines build on the company's reputation in its other lines. A company can lengthen its existing product lines to become a more full-line company. It can add more versions of each product and thus deepen its product mix. Finally, a company can pursue more product line consistency- or less-depending on whether it wants to have a strong reputation in a single field or in several fields.

From time to time, a company may also have to streamline its product mix to pare out marginally performing lines and to regain its focus. For example, P&G pursues a megabrand strategy built around 23 billion-dollar-plus brands in the household care and beauty and grooming categories. During the past decade, the consumer products giant has sold off dozens of major brands that no longer fit either its evolving focus or the billion-dollar threshold, ranging from Jif peanut butter, Crisco shortening, Folgers coffee, Pringles snack chips, and Sunny Delight drinks to Noxzema skin care products, Right Guard deodorant, Aleve pain reliever, Duracell batteries, CoverGirl and Max Factor cos metics, Wella and Clairol hair care products, and lams and other pet food brands. These divestments allow P&G to focus investment and energy on the 70 to 80 core brands that yield 90 percent of its sales and more than 95 percent of profits. "Less [can] be much more," says P&G's CEO,"