What is Product Mix? Definition, Strategies & Examples
March 31, 2023 Max 8min read
Have you ever considered how companies decide which products to manufacture and sell to customers? Well, it’s not a random process. There is a strategic approach behind it, and it’s called product mix.
Product mix refers to the combination of all the different product lines and individual products that a company offers. Consider it a successful recipe, with each ingredient carefully chosen to produce a well-balanced and profitable product portfolio.
So, why is product mix so crucial? Let’s take the example of a restaurant serving only one type of cuisine. It may be tasty initially, but eventually, customers will want to explore other options. Similarly, if a company only offers one product type, it limits its customer base and revenue potential.
That’s why companies invest significant time and resources in developing their product mix. They analyze customer needs and market trends to create a diverse range of products that cater to different demographics and lifestyles.
In this article, we’ll take a closer look at the fundamentals of product mix, including its dimensions and why it matters.
What is Product Mix?
Definition of Product Mix:
Your product mix is your business’s complete range of products or services. It includes everything from individual products to entire product lines. Your product mix can get broken down into categories such as product type, product line, and product bundle.
The term ‘product mix’ refers to the collection of products and product lines a company produces. However, the composition of a product mix may vary significantly between companies.
Some organizations offer only a few products, while others have numerous product lines, each comprising several different products.
A product line is a cluster of related products that share common characteristics. Such products are designed to appeal to the same target audience and typically get priced in a similar range.
Professionals in the product development department usually create flowcharts demonstrating the various product lines and how they interrelate.
It’s worth noting that a well-crafted product mix can help a company meet the needs of a diverse customer base, as it offers a range of products to suit varying preferences and requirements. Therefore, companies often strive to develop a balanced product mix that includes various product lines and individual products.
How Does Product Mix Help a Business?
Hope you are clear with the product mix definition. Time to discuss the significance.
The product mix of a business refers to the range of products and product lines that it offers. Here’s how a well-planned and diverse product mix can affect your business:
Catering to Diverse Consumers and Target Markets
By offering various products, businesses can appeal to a diverse range of consumers and target markets. A more extensive product mix can help establish the business’s brand reputation and strengthen its customer base.
Reducing Risks Through Diversification
Relying on a single product or product line can be risky for a business. A diverse product mix can lower the risk by reducing the company’s dependence on one product.
By analyzing data accumulated through the product mix, a business can gain insights into the direction it’s heading in and plan for the future.
Serving Existing Customers Effectively
Customer needs and preferences change over time. By expanding the product mix, businesses can meet evolving customer demands and improve customer satisfaction. It can lead to increased customer loyalty and repeat business.
Maintaining Quality and Brand Integrity
It’s crucial to be careful while adding new product lines to the mix, especially as a business grows. Maintaining quality and brand integrity is paramount, and companies must maintain the quality of their existing products while introducing new ones.
As you can see, the benefits of product mix is notable.
Dimensions of Product Mix
The product mix is not just limited to the number of product lines but also involves different dimensions that contribute to the overall product offering of a company.
Here are the three dimensions of the product mix:
Width: How Many Product Lines Are Offered?
The number of products by a business is known as its product mix’s width.
A broader product mix means that the company provides more types of products to its customers. For example, a company that produces smartphones and laptops has a more comprehensive product mix than one that only makes laptops.
Length: How Many Products Are in Each Product Line?
The total number of products a business offers across all product lines refers to the product mix length. If a company has five different product lines, and each product line has three products, then the length of the product mix would be 15.
Depth: How Many Variations of Each Product Are Offered?
The depth of the product mix is a number of variations of each product in a particular product line. It includes different product characteristics such as size, color, or flavor.
For example, a company that sells toothpaste may offer different flavors and sizes within the same product line to cater to other customer preferences.
Consistency: How Do the Products Maintain Brand Identity and Coherence?
Consistency pertains to the degree of similarity between the different items in a product line, be it in their production, usage, or distribution.
Consistency brings several advantages, such as streamlined distribution and reduced expenses. It also helps maintain the coherence of the brand identity with the products sold.
For instance, McDonald’s is known for its consistency in the quality and taste of its burgers worldwide. This consistency lets customers know what to expect from the brand, regardless of location.
Another example is Apple’s consistency in its product design and user interface, which fosters brand recognition and customer loyalty.
What are Product Mix Strategies?
When it comes to vending products, companies have various tactics to create a flourishing mix of products based on their objectives and aspirations. Let us discuss some of these product mix strategies in detail.
- Expansion: One of the strategies is expansion. This strategy is employed when companies feel they need help to compete in the market with their current offerings. They add new product lines, even if they are unrelated to the company’s existing products.
- Contraction: Another strategy is contraction. Companies use this strategy to discard unprofitable product lines or individual products. By streamlining their offerings, they can focus only on the products making them the most money.
- Alteration of existing products: The third strategy is altering existing products. Instead of developing entirely new products, companies can enhance their existing products by adding new features, improving quality, or enhancing performance. It is less risky than creating new products from scratch.
- Product differentiation: The fourth strategy is product differentiation. This strategy involves positioning a product as superior to its competitors without changing its features, qualities, or price. Companies use advertising and marketing techniques to persuade consumers that their product is better.
In addition to these four main strategies, there are some complementary strategies that companies can use together:
- Deepening depth: Companies can deepen their product mix by adding more models or varieties to their existing product lines.
- Developing new uses: Instead of changing the product lines, companies can suggest new ways to use their products.
- Trading up: Companies can improve their brand image and encourage customers to buy their other products by adding a more expensive or prestigious product to an existing line.
- Trading down: Companies can attract customers who may need help to afford the original versions by adding a cheaper product to an existing line of high-cost products.
Companies must understand these strategies and utilize them according to their objectives to ensure a successful product mix.
Examples of a Product Mix
Coca-Cola offers several product brands, including Minute Maid, Sprite, Fanta, and Thumbs Up. These products form the width of the company’s product mix, which comprises over 3,500 products, indicating its length.
The different variants of Minute Maid juice, such as apple juice and mixed fruit, represent the depth of the product line. Since Coca-Cola primarily deals in beverage products, it has a greater level of consistency in its product mix.
Several factors influence a company’s product mix, including its age, financial standing, area of operation, and brand identity. New companies typically start with a narrow product mix consistent across its width, length, and depth.
Conversely, companies with good financial standing tend to have a more comprehensive, longer, and deeper product mix, albeit with less consistency. The area of operation and brand identity also play a role in shaping a company’s product mix.
What Are the Factors That Influence the Product Mix?
Several factors can impact the decision to expand, contract, or modify product mix. Here are some of the critical elements of product mix:
- Profitability – Companies constantly strive to maximize profits, so they may adjust their product mix to improve profitability. It could involve adding new product lines or items to existing lines or modifying the mix in other ways. Ultimately, the product mix is adjusted to generate more profits.
- Company Objectives and Policies – The product mix must align with the objectives and policies of the company. The company may change the product mix to support its target objectives.
- Production Capacity – The capacity of the production plant or factory is a significant factor in deciding on the marketing mix. The product mix should get designed to ensure optimal production capacity.
- Demand – The popularity of products among consumers is an important consideration. Marketers must study consumer behavior to identify which products are in demand. The product mix should adjust to meet consumer needs and wants over time, reflecting changes in preferences and habits.
- Production Costs – Production costs play a role in deciding which products to produce. Companies will prefer to create products that can get made within their budget. The business might stop making a product if the expense of production goes up.
- Government Rules and Restrictions – Companies must comply with government regulations, and restricted or banned products may need to be dropped. The legal framework directly impacts the size and composition of the product mix.
- Demand Fluctuation – Demand for products can get influenced by various factors, including seasonal effects, non-availability of substitutes, increases in population, wars, droughts, floods, and other events. The product mix must get adjusted to meet changing demand.
- Competition – The product mix strategy adopted by competitors can significantly impact a company’s product mix. Companies may need to adjust their product mix to respond effectively to their competitors.
- Other Elements of the Marketing Mix – Other marketing mix elements, such as price, promotion, and distribution, must also be considered. These elements must be consistent with the product mix to carry out marketing activities effectively and efficiently.
- Increased complexity: As the number of product lines and individual products or services increases, it can become more challenging to manage inventory, supply chain, and production.
- Higher costs: Developing and manufacturing new products can be expensive, mainly if there is a need to invest in new equipment or technology. Companies may also need to spend more on marketing and advertising to promote their expanded product lines.
1. Meeting changing market demands
Adding new products can meet the changing market demands of competition, technology, and demographics.
2.Attracting new customers
New products attract new customers with diverse needs and expectations.
3.Improving image and reputation
Introducing new products can improve the company’s image and reputation by catering to different income levels and preferences.