2.02 Mix and Match (Nature of Product Mix)
What is a product item?
Each individual good, service, or idea that a business offers for sale is a product
What is a product mix?
The particular assortment of products a business offers to meet its market's needs and its company's goals
Why would a company use a trading-down product-mix strategy?
To attract a new target market by using trading down, the company is adding products or lines that are less expensive than what it previously offered.
Why would a company use a trading-up product-mix strategy?
To enhance the company's image
Why would a company use an alteration product-mix strategy?
To limit costs Altering existing products is less expensive than developing a new product and has a greater chance of success.
Why would a company use an expansion product-mix strategy?
To satisfy customers' desire for variety , customers want options. By expanding their product mix, businesses satisfy that desire.
What are the disadvantages of an expansion strategy?
Adding product items or product lines increases costs of inventory, marketing, transportation, and storage. If the new products are more complex or sophisticated, the sales staff may require additional training to sell them.What are the disadvantages of an expansion strategy?
What are the disadvantages of an alteration strategy?
If a company chooses to alter an entire line at one time, it can be quite expensive. If the company decides to alter the line in stages, competitors have a chance to observe the changes and alter their own products accordingly.
What are the disadvantages of a trading-up strategy?
If the business uses trading to enhance its image, the business must be careful that present customers are not lost in the process of gaining new ones. While sales may be generated for the new product or line, sales of established products may decline.
Why would a company use a contraction product-mix strategy?
It has lost its appeal to customers. There are few products that satisfy customers indefinitely.
How do companies classify product lines?
Product class Customer group Distribution method Price and/or quality
What are the disadvantages of a contraction strategy?
The fewer products or lines a company has, the greater the financial risk to the company if one of them fails. Competitors may also step in to provide the products and draw away customers.
What are the disadvantages of a trading-down strategy?
The firm's reputation for high quality may be damaged by the addition of a lower quality item to its product mix
Describe the four product-mix dimensions.
Width Length Depth Consistency
Why are product-mix decisions so important?
Width - This term, also called breadth, refers to the number of product lines a company carries. Length - Length refers to the total number of products in the product mix. Depth - This term refers to the assortment of sizes, colors, flavors, and models offered in a company's product lines. Consistency refers to how closely a company's product lines are related in terms of: - End use - Methods of distribution and production - Target market - Price range
What is a product line?
a group of related product items is the product
