Chapter 10 Product-Mix Strategies

Sommers

Barnes

Ninth Canadian Edition

Presentation by

Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS

Copyright 2001 by McGraw-Hill Ryerson Limited

Chapter Goals
To gain an understanding of: The difference between product mix and product line Major product-mix strategies: Positioning, expansion, alteration, contraction, trading up and trading down Managing a product throughout the Product Life Cycle Planned obsolescence Style and fashion The fashion-adoption process
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Product Mix and Product Line

The product mix is the set of all products offered for sale by a company. A product mix has two dimensions:
Breadth - the number of product lines carried. Depth - the variety of sizes, colours, and models offered within each product line.

A product line is a broad group of products, intended for similar uses and having similar characteristics.
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Product Mix - An Example

BREADTH (DIFFERENT LINES) Lawn mowers Gardening tools Lawn furniture Power rotary Power reel Hand-powered Rakes Hoes Shovels Chairs Chaise lounges Benches

Various sizes and prices in redwood or Each in various Each in various aluminium with sizes and prices sizes and prices plastic webbing

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Product Mix Strategies

Positioning the Product In Relation to a Competitor In Relation to a Product Class or Attribute In Relation to a Target Market By Price and Quality Product-Mix Expansion Line Extension Mix Extension
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Expanding the Product Mix

Mix-extension strategies include:
Same brand, related product (Tim Horton coffeemaker) Same brand, unrelated product (Swiss Army watch) Different brand, unrelated product (Pepsi & KFC) Different brand, related product (P&G adds Luvs diapers; already makes Pampers)

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Trading Up and Trading Down

Trading up: Adding a higher-priced product to a line to attract a higherincome market and improve the sales of existing lower-priced products. Trading down: Adding a lower-priced item to a line of prestige products to encourage purchases from people who cannot afford the higher-priced product, but want the status.
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Other Product Mix Strategies

Alteration of Existing Products:
Improve an established product with new design, new package, new uses.

Product-Mix Contraction:
Eliminate an entire line or reduce assortment within it. Pruning to reduce similar brands. Dump unprofitable or indistinct brands.
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The Product Life Cycle

the concept of the product life cycle applies to product categories, not to brands; it is related to the concept of diffusion of innovation different products will have differentlyshaped life cycle curves; will diffuse at different rates a product is normally perceived to pass through four stages over its life cycle; introduction, growth, maturity, and decline each stage requires different marketing strategies
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Product Life Cycle Stages

Introductionmost risky and expensive. Growthboth sales and profits rise, often rapidly. Maturitysales increase at a decreasing rate and profits decline. Declinedemand drops, often because of another product development.
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Product Life Cycle Curve

INTRODUCTION GROWTH MATURITY DECLINE

Sales Volume Dollars

Profit 0 Loss

Time in years

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Strategic Implications of the Stages

introductory stage: developing the market,
creating awareness, reaching the innovators growth stage: competition begins, sales grow quickly, profits peak, market penetration maturity stage: competition is intense, sales slow down, differentiated product offerings, customers are brand loyal, few new entrants decline stage: customers move to other options, competitors leave, profits are low, consider exit
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Characteristics of Life Cycles

length of the life cycle will vary across markets; some are quite short and may be getting shorter some fads have very short life cycles, while other products stay at maturity for years in high-tech markets, life cycles are very short some products do not make it through all four stages; they may fail in introduction the life cycle must be considered in relation to a specific market; stage may vary across markets
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Managing the Life Cycle

Successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage. when to consider entering the market how to manage to capitalize on growth it is possible to develop strategies that will extend the maturity stage; modify the product, devise new uses, or design new appeals
greatest challenge comes at the decline stage which may result in product abandonment
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Different Life Cycles

Aggregate sales Part a - Extended introduction stage Part b - Fad

Time in years

Time in years

Aggregate sales

Part c - Indefinite maturity stage

Time in years
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Planned Obsolescence Fashion and Style

Planned Obsolescence: Style: Technological or A distinctive manner functional of construction or obsolescence; other presentation in any art, things do it better product or endeavour. now. Fashion: Style obsolescence: Any style that is Still serviceable, but accepted and looks out of date purchased by now. successive groups of people over a long period of time.
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Fashion-Adoption Process
Series of buying waves as a given style is popularly accepted by one group after another. Three theories of fashion adoption: Trickle-downa given fashion flows down through several socioeconomic levels. Trickle-acrossthe fashion moves horizontally and simultaneously within several socioeconomic levels. Trickle-upa style first becomes popular at lower levels and then flows upward.
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Fashion Adoption Theories in Action

Product offered first to upper socioeconomic group Product introduced at same time in all three types of stores:
TRICKLE-ACROSS
Exclusive high-priced specialty stores (boutiques)

TRICKLE-ACROSS

TRICKLEUP
Product adopted first by lower socioeconomic group
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TRICKLEDOWN

Medium-priced department stores and specialty stores

TRICKLE-ACROSS
Discount stores

Copyright 2001 McGraw-Hill Ryerson Limited