What is Product Line ?
A product line denotes the group of closely linked products which the organization offers. These products are linked together as they operate in an identical manner, used by same group of customers, have similar price range, or sold via same type of retailers. For example, ITC is a major brand producing sever! product lines including personal care, lifestyle retailing, education and stationary, etc. Product line is very different from product bundling. Where few items combine to form a single product.
The fundamental basis of all the products in a product line is same. Therefore, a good marketing plan is sufficient to improve the sales of all the products in a product line. Generally, different products with different prices are offered in a product line. In this way, the organization makes sure that all its products under the product line are picked up by every type of customer.
The act of introducing a new product in the present product line is called as 'product line extension'. Primarily, the idea of product extension is used to avert competition. The motive behind launching products similar to that of competitors, is keeping the customers attached to the brand they are loyal with. Usually, people tend to buy products from known brands. Thus, in case of buying any new product, people prefer to purchase it from known brands rather than from any unfamiliar/unknown source.
A special plan of action is required for marketing different products in a product line. A marketer should always know about the competitors and their products so as to offer suggestions to the organizations regarding inclusion of new products in the current product line. Along with this, the marketing firm should also be able to identify popular and unpopular products in the market. Statistical data collected from the market can be very helpful to the marketers to find out which products should continue to be part of the product line and which should be discontinued, Pricing is helpful in creating a difference between various products. Organizations try to justify expensive products on the basis of particular constituents which are part of those products.
Forms of Product Line Decisions
Marketers encounter several difficult decisions on product line featuring and product line length while. establishing product line strategies. These product line decisions are discussed below:
1) Product Line Length Decisions:
By including more items in the product line, if the profit increases, the product line is said to be too short. On the other hand, by eliminating few items from the product line, if the profit still increases, the product line is said to be too long. The length of any product line of an organization is determined by its objectives. One objective may be to enhance the sales. For example, the famous brand BMW tries to encourage its customers to shift, from the current BMW 3 series to the next level of BMW 5 or BMW 7 series. Another objective may be to promote the cross-selling. For example, computers as well as printers are provided by Hewlett-Packard. Protection against economic uncertainties may also be the objective of an organization. For example, the popular brand GAP has several outlets under its flagship like Old .Navy, GAP, Banana Republic, etc., which offer products of various price ranges to absorb the economic changes taking place globally.
A product line can be expanded by two methods namely: line stretching and line filling:
i) Product Line Stretching Decisions:
The product line offered by all companies includes specific variety of items out of the complete, range of products, furnished by the entire industry. For example, Maruti deals with automobiles of the most economical or moderate price range in the automotive Industry. If a business entity expands its product line over, and above the present array, it is learned as 'line stretching. Line stretching can be exercised in the following three ways:
a) Downward Stretch: Several organizations start with offering most expensive products in the market and gradually try to extend at lower levels. For example, TATA Motors deals into midsize and high end utility car segment. It has extended its product line downwards by venturing into the small vehicle segment through launching. TATA Nano.
The key reasons for downward stretch are as follows:
- The organisation involved in serving high end market faces tough competition and decides to cuter low end market to deal with competitors.
- Presence of poor growth rate in the high end market.
- The organization includes a low end division to avoid the entry of new competitors..
The decision to stretch downward is not free from risks and uncertainties. The newly introduced low end product may result in the cannibalization of high end product of the same organization. Consequently, the low end competitors may enter the high end market "to respond to this step. Moreover the present suppliers/dealers of the organization may not be interested in handling low end products due to low profit margin and risk of losing market reputation. For example, General Motors opposed the making of small cars and this gap was immediately filled in by the Japanese companies, which recognized it as a huge opportunity. It is a fascinating fact that automobile market pioneers like Honda and Toyota are venturing into the smaller car segment after appreciation of Suzuki's success in that segment.
b) Upward Stretch: Organizations serving low end market may intend to move into the high end, markets High level profit margins, elevated growth rate or an opportunity to feature as a full-line producer may be few reasons which may tempt organizations to enter the high end market. For example, initially Maruli was known to produce low end cars, but it moved into the high end market with the launch of Maruti Esteem and Maruti 1000. The decision of upward stretch is also risky. The well-established high end competitors may, respond by plunging into the lower end market. It is not easy for sales executives as well as for suppliers/vendors to effectively perform in the high end market without proper skills and training,
c) Two-way Stretch: The organizations belonging to the mid-level of the market can extend their product line in any one way out of the two options available. i.e., either upwards or downwards.
ii) Product Line Filling Decisions:
Product line extension is also possible by including new products in the current product line. To achieve gradual increase in profit levels, to persuade the agents with regards to the criticism faced due to decrease in sales because of the products not being present in the current product line, to make use of the surplus capacity available, lo become market leader in the full-line segment, to block the loopholes to control the competitors, are the few reasons behind product line filling. Excessive product line filling may confuse the consumers and consequently reduce the sales of other products. Each item needs 10 have a distinct place in the consumer's mind. The distinctness of each product should be thoroughly significant. The new product recommended should have an advantage in terms of increased market acceptance and should not be included to reassure the internal requirements of the company.
2) Product Line Modernization Decisions:
Here the product, a part of the product line, is revised and re-launched to meet the contemporary styling requirements and preferences. Product lines should be updated as per the latest trends in the market. This process of modernization can be, in terms of the technology used for the production of the product or the appearance or style of the product. Many companies have adopted the modernization process. For example, new look of 800cc car developed by Maruti, variety of PC chips developed by Intel, launch of Splendor plus in place of the older Splendor model by Hero Honda, etc., are the significant examples of the modernization decisions. It is a strategy where the company introduces new items in place of old ones dropped out. Product line modernization is a constant process in today's fast transforming product market. The consumers are inspired to shift their preferences towards expensive and high-end products due to constant improvements formulated by the companies.
3) Product Line Featuring Decisions:
This is all about deciding which product(s) to feature in the organization's product line. The manager deciding the product line strategies picks up one --or more products from the product line to represent as a flagship product or a prominent item of the line to increase the demand. This kind of decision is taken in case of presence of several non-profitable items in the product line. Thus, line featuring is helpful in elevating the sales volume of the organization. For example, Dream Service is the current focus of marketing campaigns of Honda.
4) Product Line Pruning Decisions:
This strategy finds out the products which are poor performers in terms of profit earning potential in the product line and removes them from the line to increase the earning potential of the company. This process decreases the length of the product line This process is adapted by the company when it is unable to cam the expected profit levels when a specific pattern is not well received t the customers or not being beneficial for the growth of the organization. Pruning decisions can be taken to make physical or human resources available for other capable models which are being utilized by the unproductive model.
Product Line Analysis
While launching a product line, the business organization usually creates a basic unit and some additional elements which can be combined with the basic unit to fulfil the needs and wants of the various customers. Builders make a sample flat to give the customers an actual idea. Similarly, vehicle manufacturers also launch several variants that are based on a basic model. A variety of features can be added in such products and at the same time manufacturing cost also gets lowered.
Product-line managers should have a very sound knowledge of profit and sales of every variant of the product line, so that they can decide which product needs amendment, which needs promotion, which needs to be shut down, and which is performing up to the mark and should be continued. The knowledge of market profile of every product is also important, which is described below:
1) Sales and Profits:
The profit margin of every product of a company's product portfolio is different from each other. A retailer makes very little margin on the milk, curd, bread, and eggs, gains little higher margin on soaps, vegetable oils, and charges higher margins on perfumes, air-fresheners, make-up items, etc.
Various products of a business organization can be divided into four categories which have varying gross margins, depending upon promotion and sales volume. These categories are explained below with the help of an illustration based on smartphones:
i) Core Products: These are the products which yield high sales volume and have high promotions but have low profit margins as these products are seen as undifferentiated products, e.g., basic smartphones.
ii) Staples: These are the products which have low sales volume and very low promotional activities. A little bit higher margin can be obtained, eg, higher RAM in smartphones
iii) Specialties: These are the products which have low sales figure but have very high promotional activities and they can also provide profits through various supporting services, e.g., HD camera in smartphones.
iv) Convenience Items: Convenience items are those items which are used along with any other item only for the convenience of the user. Such products are promoted limitedly but have a large sales volume. The consumer generally purchases these products with the main product. The margins can be relatively higher, e.g., screen protector, covers, headphones, etc.
The important point to be focused by the organization is that these products vary in the probability for having high prices or are advertised better to improve their profit margin and sales or both.
2) Market Profile:
The marketer should always focus on the relative positioning of his product line in comparison to the product line of competitors. For example, company X has a product line of paperboards. Weight and finishing quality are the two features related to paperboard. Its variants are sold in weight of 90,120,150 and 180gsm. Other variants are on the basis of finished quality i.e., low, medium, and high.
Company A sells two items in extra-high weight category varying from low to medium finish quality. Competitor B sells four products that differ in finish quality and weight Company C sells three products in which weight and quality are correlated, i.e. higher the weight better the quality. Company D sells three products with. varying finish quality and all are light weighted. Company X sells three items that differ in finish quality and weight.
In the product map, various products are shown which are competing with the products of Company X. For example, medium quality, low weight paper of Company X has competitors from Company D and B, but its medium quality and high weight paper has no competing product. The map also shows possibilities of new products, for example, there is no company which is producing high-weight and low quality paper. If the company X predicts an unsatisfied demand and can manufacture at low cost, it can add this product in its product line. One more advantage of product mapping is that it helps in identifying the market segments. Pricing of product mix and the length of product line are the two areas on which the information can be obtained with the help of product line analysis.
Types of Product Line
Here are some common types of product lines:
1) Single Product Line: This is the simplest form of a product line, where a company offers only one product or a closely related set of products. For example, a company that exclusively sells a particular type of software.
2) Product Line Width (Breadth): This refers to the number of different product lines a company offers. For instance, a company that sells both smartphones and laptops has a broader product line width than a company that only sells smartphones.
3) Product Line Length: This refers to the total number of products within a product line. For example, if a company sells smartphones in various models and colors, each model and color variant contributes to the product line length.
4) Product Line Depth: This refers to the different variations or models within a specific product category. For example, a smartphone company might offer a range of models with varying specifications and features.
5) Product Line Consistency: This pertains to how closely related the products in a product line are. A consistent product line might consist of items that are very similar, while an inconsistent product line could include a wide range of unrelated products.
6) Product Line Stretching: This involves expanding a product line by adding new products that are higher or lower in price and quality. For example, a luxury car manufacturer might introduce a more affordable model to reach a wider customer base.
7) Product Line Filling: This involves adding more items within the present range of a product line to capture a larger share of the market. For instance, a company selling smartphones might introduce new models with different specifications or features.
8) Brand Extension: This involves using an existing brand name to launch a new product line in a different category. For example, if a company known for making sports shoes starts producing sports apparel.
9) Multibrand Product Line: This occurs when a company markets multiple brands within the same product category. For instance, a company may have multiple brands of toothpaste, each targeted at a different segment of the market.
10) Cannibalization: This occurs when a new product in a product line competes with an existing product from the same company. It's a common concern when introducing new products, as it can potentially reduce sales of existing products.
11) Private Label (Store Brand) Product Line: This involves products that are produced by one company but sold under the brand name of a retailer. These are often used to offer more affordable alternatives to established brands.
12) Exclusive Product Line: This refers to products that are only available through specific channels or retailers. It creates a sense of exclusivity and can be used as a marketing strategy to attract certain customer segments.