What is Product Mix ?
A group of all product lines and commodities supplied by a seller to its customers is called product mix. It can also be termed as 'product assortment'. A product mix is offered by a company which has many product lines under its tag. Generally, it is not necessary to have correlated items in a product mix. Thus, product mix is a mixture or combination of all the products made available by a firm to its customers. It can also be termed as "a compilation of the various products produced or marketed by a company". For example, a company's product mix consists of shampoos, detergents, soaps, etc., produced by it.
According to American Marketing Association, "Product Mix is the composite of products offered for sale by a firm or a business unit". For example, if an enterprise manufactures or deals with different varieties of soap, oil, toothpaste, toothbrush, etc., the group of all these products is called 'Product Mix'.
The possibility of fulfilling the diverse needs of customers increases with an increase in the number of products offered by the manufacturer. Several enterprises come up exclusively with a single product. Such organizations may fulfil all the requirements and needs of their customer groups by having command and proficiency in this single product. The original brand may come up with more products and expand its line if the company possesses necessary potential and expertise and if the needs of the consumers are justified.
Dimensions of Product Mix
The product mix of a company can be strengthened to satisfy the fresh requirements of customers or group of customers so as to help the organization develop and progress. Expansion and inclusion of products leads to an exhaustive marketing budget for the company. This addition may cause competition by the similar brand in the market and overlapping of marketing strategies. For example, the Dodge Challenger and the Ford Mustang are strong rivals in the car industry but each one attempts to satisfy consumer requirements.
The product mix of an enterprise has particular length, width, depth and consistency. All these factors are explained below with the help of an example about product mix of Hindustan Unilever Limited (HUL):
1) Product Mix Length
The total number of products comprising the product mix is termed as the product mix length. Several brands are part of each product line offered by Hindustan Unilever Limited. For example, product mix consists of ten soaps, four shampoos, two toothpastes, six laundry detergents, etc.
2) Product Mix Width
The number of product lines offered by a company denotes the span or width of the product mix. HUL offers a considerably extensive product mix which consists of several product lines dealing in cosmetics, food, household cleaning products, paper, medicines and personal care products. There are several other product lines which are part of the product mix of HUL.
3) Product Mix Depth
Different forms of products available in the product line define the depth of the product mix. It is understood that the various types of products available in the product line form the product mix depth. For example, the famous toothpaste "Close up' is available in three types namely; blue, green and red and in 5 sizes, it can be concluded that the depth of Close up is 15. In case of HUL, the average of various kinds of product groups offered under the brand name need to be calculated for computing the average product mix depth.
4) Product Mix Consistency
The close association of the product line in terms of the final consumption, product distribution networks, manufacturing requirements or any other possible ways, decides the consistency of the product mix. As HUL majorly deals in consumer goods, all product lines have maintained required consistency level because of similar distribution networks.
Product Mix Strategies
The major product mix strategies required to be managed are explained below:
1) Product Line Expansion/Contraction:
A collection of many product lines is termed as concentration of product mix. An extended and lengthy product line is cut back to remove the products which are not cost effective. Extending the current product line is termed as diversification. Widening the depth and width of the product mix can help the organization in availing the prevalent opportunities in the market. For example, companies dealing in audio equipment manufacturing can expand its activities by manufacturing television sets. There may be additions or deletions or even both in the current product lines by an organization. Application of latest and ultra-modern technology helps a company to have an upward stretch or it may settle for a downward stretch by using lucid technology.
2) Product Modification:
This product mix strategy talks about modifying or altering the basic features of a product namely; shape, size, style, cost, colour, etc. A company usually considers modification method when it is striving to revive or strengthen the demand of a particular product. At times, simply an external alteration is necessary in a product or in the current product line. The modification being tangible or intangible can be accomplished by re-creating. re-developing, altering size and including or eliminating some characteristics related to the product. For example, popular pan masala brand, Pan Parag, launched small packets offering different quantities and at variable costs to gain access to different market segments and to increase its market area. Also, diverse growth was observed in the market share of the product when the company planned to include tobacco, i.e., zarda, in the pan masala. Several factors like organizational objectives in the long-run, competitive growth observed in specific product market and consumer needs and priorities majorly influence the product modifications.
3) Product Elimination:
It is always not possible to refine or change products to complement the market requirements. On such cases, removing these products from the market can prove to be a beneficial option. The activity of removing the product is known as 'product elimination in technical terms. This activity of elimination or deletion can be for the whole product line or for a specific item of the product line. Products with non-profitable-scale of production and poor cost- inventory analysis (due to low demand) are generally eliminated from the market. The profit levels may not justify the unreasonable management time consumed by such product. Since, these products are obsolete they may lower the company's reputation. Therefore, elimination decision is very crucial in such cases.
Importance of Product Mix
- Diversification of Revenue Streams: A well-balanced product mix allows a company to generate revenue from multiple sources, reducing dependence on a single product or market segment.
- Catering to Different Customer Segments: It enables a company to meet the varying needs and preferences of different customer groups, broadening its customer base.
- Competitive Advantage: A strategically designed product mix can give a company a competitive edge by offering a wider range of options and solutions compared to competitors.
- Enhanced Brand Image and Loyalty: A diverse product mix can enhance a company's reputation and brand image, signaling innovation and a comprehensive understanding of customer needs.
- Mitigation of Seasonal or Economic Fluctuations: A diversified product mix can help stabilize revenue and profits, as demand for different products may fluctuate at different times or under different economic conditions.
Limitations of Product Mix
- Complexity in Management and Marketing: Managing a wide product mix can be challenging, requiring significant resources in terms of inventory management, marketing efforts, and distribution logistics.
- Risk of Cannibalization: If products within the mix are too similar, they may compete with each other for market share, potentially leading to reduced overall profitability.
- Possibility of Product Obsolescence: A wide product mix may increase the risk of some products becoming outdated or obsolete, resulting in potential losses if not managed properly.
- Higher Research and Development Costs: Introducing and maintaining a diverse product mix may require substantial investment in research, development, and innovation, which may not always yield immediate returns.
- Customer Confusion or Overwhelm: A very broad product mix could overwhelm customers with too many choices, potentially leading to decision fatigue and reduced customer satisfaction.