A company’s collection of goods and services is a thoughtfully managed portfolio, not a simple inventory list. Organizations actively shape and refine their product mix as a central part of their business model. This strategic approach allows them to adapt to market changes, meet diverse consumer needs, and build a competitive position. Managing what a company sells is a driver of its growth and public identity.
Understanding the Product Mix
A product mix, or product assortment, is the complete set of all product lines and items a company offers. This portfolio is defined by four dimensions: width, length, depth, and consistency.
The width of a product mix refers to the number of different product lines a company carries. For instance, Apple’s product mix includes lines such as the iPhone, iPad, Mac, and Apple Watch. A wider mix allows a company to target different customer segments and diversify its business.
Length is the total number of individual items within all product lines. For example, The Coca-Cola Company’s beverage lines include various sodas, juices, water, and sports drinks. The total count of all these individual products constitutes the length of its mix.
Depth is the number of versions offered for each product within a line, such as variations in size, color, or flavor. A single product like Coca-Cola has significant depth, with options like Classic, Diet Coke, and Coke Zero Sugar. This provides consumers with choices tailored to their preferences.
Consistency describes how closely related the various product lines are in end use, production requirements, or distribution channels. The Coca-Cola Company’s product lines are highly consistent as they are all beverages sharing similar logistics. In contrast, a company selling both home appliances and insurance services would have very low consistency.
Key Product Mix Strategies
Expansion
Expansion involves increasing the number of product lines to widen the company’s product mix. The goal is to enter new markets, attract different customers, and capitalize on an existing brand reputation. This can involve adding related product lines or venturing into new categories. For example, a skincare company known for facial creams and serums might launch a new line of hair care products, including shampoos and conditioners.
Contraction
Product mix contraction involves reducing the number of product lines a company offers. The goal is to eliminate underperforming or misaligned products to reallocate resources to more profitable ventures. For instance, a tech company might discontinue its digital camera line to concentrate its efforts and investments on its successful smartphone division.
Deepening the Line
This strategy increases the depth of a product line by adding more variations to a current product. The objective is to cater to existing customer preferences, occupy more shelf space, and fend off competitors. For example, a beverage company might add new flavors to its flagship cola, deepening that specific product line.
Product Line Filling
Product line filling adds more items within the current range of a product line to plug market gaps and deter competitors. It differs from deepening by adding distinct products at similar price points, not just variations. For example, a car manufacturer could introduce an SUV model sized and priced between its existing compact and full-size offerings.
Product Alteration
Product alteration, or modification, involves changing an existing product’s attributes, such as its quality, features, or design. The aim is to revitalize the product for shifting consumer demands or technological advancements. A software company releasing a major update that overhauls the user interface and improves performance is an example of product alteration.
Repositioning
Repositioning changes how a product or brand is perceived by the target market. This strategy shifts the marketing message to appeal to a new demographic or present a new use case, without necessarily altering the product. For example, baking soda was repositioned from a baking ingredient to a versatile household cleaning and deodorizing agent.
Benefits of an Effective Product Mix Strategy
An effective product mix strategy provides significant advantages. A well-structured mix allows a business to cater to a wider array of customer needs and preferences, which can increase market share. By offering a variety of products, a company can attract different consumer segments.
Another benefit is the diversification of risk. A company that relies on a single product is vulnerable to shifts in market trends or a strong competitor. Spreading offerings across multiple lines can mitigate the impact of a downturn in any single area, creating more stable revenue streams.
A strategic product mix can also enhance a company’s brand image. Offering a range of high-quality products can position a company as a trusted leader, fostering greater customer satisfaction and loyalty. This loyalty leads to repeat purchases and a stronger customer base.
How to Choose the Right Strategy
Selecting the right product mix strategy requires evaluating internal and external factors. A company’s goals are a primary consideration; a business aiming for rapid growth might pursue an expansion strategy, while one focused on profitability might use contraction to eliminate low-margin items. Financial resources and production capacity also play a large role, as expanding or altering product lines requires significant investment.
External market conditions are equally important. Analyzing competitor actions can reveal market gaps that a line-filling strategy could exploit, or indicate that a market is too saturated for a new product line. Staying attuned to market trends and consumer behavior is also necessary. For instance, a growing preference for sustainable products might prompt a company to alter its items to be more eco-friendly or reposition its brand.