Product Mix Decisions

The product mix (also known as product assortment) refers to the total collection of products and services a company offers to its customers. It is a critical concept in marketing as it directly impacts a company's brand image, market coverage, profitability and competitive position.

Examples

1. Hindustan Unilever Limited (HUL):

   • Product Mix: Personal care (Dove, Lux), home care (Surf Excel, Rin) and food & beverages (Kissan, Knorr).

2. Apple Inc.:

   • Product Mix: Smartphones (iPhone), computers (Mac), wearables (Apple Watch) and services (Apple Music, iCloud).

Key Dimensions of a Product Mix

1. Product Mix Width

The number of product lines a company offers.

• Example: Samsung offers smartphones, televisions, home appliances and semiconductor chips.

2. Product Mix Length

The total number of items within all product lines.

• Example: Nestlé has a long product mix with items like Maggi, KitKat, Nescafé and Milkmaid across various lines.

3. Product Mix Depth

The number of variations offered for each product in a line. Variations can be in size, flavor, packaging, or features.

• Example: Colgate toothpaste comes in variants like Herbal, Salt, Sensitive and Whitening.

4. Product Mix Consistency

The degree of similarity among products in terms of use, production processes, or distribution channels.

• Example: McDonald’s product mix (burgers, fries, beverages) is highly consistent, targeting fast-food lovers.

Types of Product Mix Decisions

Product mix decisions involve strategic planning to determine the breadth, depth, length and consistency of the mix.

1. Expanding the Product Mix

Adding new product lines or items to meet customer demands or enter new markets.

• Example: Amazon expanded into electronics (Echo) and groceries (Whole Foods).

2. Pruning the Product Mix

Eliminating underperforming or outdated product lines to focus on profitable items.

• Example: Coca-Cola discontinued Tab, its first diet soda, in 2020.

3. Modifying Product Lines

Improving or redesigning existing products to match changing customer preferences.

• Example: Samsung continuously upgrades its Galaxy smartphone series.

4. Diversification

Entering new industries or product categories to reduce dependency on existing lines.

• Example: Tesla diversified from electric cars to energy solutions like solar panels and Powerwall batteries.

Strategies for Product Mix Decisions

1. Line Extension

Adding products to an existing product line to attract more customers.

• Example: Amul introducing almond-flavored milk alongside regular milk.

2. Brand Extension

Using an existing brand name to launch products in a new category.

• Example: Dettol introducing hand sanitizers alongside soaps.

3. Product Cannibalization Management

Ensuring that new products do not reduce the sales of existing products.

• Example: Apple carefully differentiates iPhone models to minimize cannibalization.

4. Customization

Tailoring products to meet regional or demographic needs.

• Example: McDonald’s offering vegetarian options in India.

Importance of Product Mix Decisions

1. Revenue Generation

A diversified product mix attracts a broader customer base and maximizes revenue.

• Example: Amazon’s mix of e-commerce, cloud computing (AWS) and devices generates massive income streams.

2. Risk Diversification

Having multiple product lines reduces dependency on a single product.

• Example: PepsiCo's beverages and snacks help balance seasonal demand fluctuations.

3. Competitive Advantage

An innovative product mix differentiates a company from competitors.

• Example: Google’s integration of hardware (Pixel) with software (Android) creates synergy.

4. Market Penetration

A strong product mix increases a company’s presence in various markets.

• Example: Tata Group’s mix includes automobiles, steel and software solutions.

Challenges in Managing the Product Mix

1. Over extension

Adding too many products can dilute the brand and confuse customers.

• Example: Too many variations of a product may cannibalize sales.

2. Balancing Innovation and Costs

Introducing new products requires significant investment in R&D and marketing.

3. Customer Demand Changes

Rapid shifts in consumer preferences require frequent updates to the product mix.

Examples of Product Mix Strategies in Practice

1. Procter & Gamble (P&G)

• Width: Laundry (Tide), hair care (Pantene), oral care (Oral-B), baby care (Pampers).
• Consistency: High, as all products are focused on personal and household care.

2. Amazon

• Width: E-commerce, cloud computing (AWS), entertainment (Prime Video).
• Expansion Strategy: Added grocery delivery with Whole Foods acquisition.

3. Reliance Industries

• Width: Energy, retail, telecom (Jio).
• Diversification Strategy: Entered e-commerce with JioMart.

The next section will cover the Product Life Cycle, offering insights into how products evolve and strategies for managing them at each stage.