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,"

Elements of Product Mix

Elements of the Product mix. refer to the various components that make up a company’s range of products. These elements help a business manage its products and create a comprehensive strategy for satisfying customer needs and driving profitability. The main elements of the product mix are Product line, Product width, Product length, Product depth, and Product consistency.

1. Product Line

Product line is a group of related products that a company offers under a single brand. These products usually share similar characteristics, cater to the same target market, or serve similar purposes. For example, a company that produces personal care items may have separate product lines for hair care, skincare, and hygiene products.

Example: Apple’s product lines include iPhones, iPads, MacBooks, and Apple Watches.

2. Product Width

Product width refers to the number of different product lines that a company offers. A wider product mix means a company has a diverse range of product lines, while a narrower mix indicates fewer product lines. A broad product width allows companies to cater to various customer segments, reduce market risk, and create cross-selling opportunities.

Example: Procter & Gamble has a wide product mix, offering a variety of product lines including beauty, grooming, health care, and household cleaning.

3. Product Length

Product length is the total number of individual products or items offered across all product lines. This includes all variants within each product line. The length helps companies assess the variety of products they offer within each product line.

Example: In the beverage category, Coca-Cola offers a long product line, with products such as Coke, Diet Coke, Coke Zero, Sprite, and Fanta.

4. Product Depth

Product depth refers to the number of variations offered within a single product line. Variations can include different sizes, flavors, colors, designs, or any other features that differentiate products within a line. Greater product depth allows companies to meet diverse customer preferences and capture niche markets.

Example: Colgate offers various toothpaste options in terms of flavors, packaging sizes, and specific benefits (e.g., whitening, cavity protection, sensitivity relief).

5. Product Consistency

Product consistency refers to how closely related the product lines are in terms of use, production requirements, distribution channels, or branding. High consistency means the products are closely related, while low consistency indicates a mix of unrelated products.

Example: A company like PepsiCo has a relatively consistent product mix focused on beverages and snacks, while a conglomerate like General Electric has a low consistency with products ranging from jet engines to medical devices.

Product Mix Strategies

Product Mix Strategies are techniques companies use to manage and optimize their range of products to better meet customer needs and improve market performance. These strategies help in deciding what products to introduce, modify, or discontinue.

1. Expansion

A company adds new product lines or variants to its product mix. This strategy is used when a company wants to diversify its offerings, target new market segments, or increase sales volume.

2. Contraction

Also known as product line pruning, this strategy involves reducing the number of products or product lines.

Companies use this when certain products become unprofitable or when they want to focus on their core products.

3. Product Modification

Company makes improvements or changes to existing products, such as adding new features, improving quality, or updating design. This strategy helps keep products competitive and relevant in the market.

4. Diversification

Company enters new markets or introduces entirely new product categories. It can be related or unrelated diversification, depending on whether the new products are similar or different from the existing lines.

5. Product Differentiation

This strategy focuses on making a product stand out from competitors’ offerings by highlighting its unique features, branding, or design. It aims to create a competitive advantage and attract specific customer segments.

6. Trading Up (Upward Stretching)

Company adds higher-end, more premium products to its product line to target more affluent customers. This strategy helps elevate the brand and capture a more profitable segment of the market.

7. Trading Down (Downward Stretching)

Company introduces lower-priced products to appeal to a broader audience or to compete with lower-cost competitors. This can help companies gain market share in a more price-sensitive segment.

8. Line Filling

Company adds new products within its existing range to fill gaps in the product line. This prevents competitors from exploiting these gaps and helps the company meet customer demands more effectively.

9. Product Line Extension

This involves expanding a particular product line by adding more variants, such as different sizes, flavors, or features. It helps attract different customer preferences within the same product line.

10. Cannibalization Management

This strategy ensures that new products introduced do not negatively affect the sales of the company’s existing products. Companies need to carefully manage product mix to avoid overlap and sales losses