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Chapter 10

Product-Mix Strategies

Copyright 2001 by McGraw-Hill Ryerson Limited

Sommers BarnesNinth Canadian Edition

Presentation by

Karen A. Blotnicky

Mount Saint Vincent University, Halifax, NS

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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 ProductLife Cycle

Planned obsolescence

Style and fashion

The fashion-adoption process

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Product Mix andProduct Line The product mixis the set of all

products offered for sale by a company.

A product mix has two dimensions:

Breadth - the number of product linescarried.

Depth - the variety of sizes, colours, andmodels offered within each product line.

A product lineis a broad group ofproducts, intended for similar uses andhaving similar characteristics.

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BREADTH (DIFFERENT LINES)

Lawn mowers Gardening tools Lawn furniture

Power rotary

Power reel

Hand-powered

Rakes

Hoes

Shovels

Chairs

Chaise lounges

Benches

Each in varioussizes and prices

Each in varioussizes and prices

Various sizesand prices in

redwood or

aluminium withplastic webbing

Product Mix - An Example

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Product Mix Strategies

Positioning the ProductIn Relation to a Competitor

In Relation to a Product Class or

AttributeIn Relation to a Target Market

By Price and Quality

Product-Mix Expansion

Line Extension

Mix Extension

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Expanding theProduct Mix

Mix-extension strategies include: Same brand, related product (Tim

Horton coffeemaker)

Same brand, unrelated product (SwissArmy watch)

Different brand, unrelated product(Pepsi & KFC)

Different brand, related product (P&Gadds Luvs diapers; already makesPampers)

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Trading Up andTrading Down

Trading up:Adding a higher-pricedproduct to a line to attract a higher-income 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 whocannot afford the higher-priced product,but want the status.

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Other ProductMix Strategies

Alteration of Existing Products:

Improve an established product with new

design, new package, new uses. Product-Mix Contraction:

Eliminate an entire line or reduceassortment within it.

Pruning to reduce similar brands.

Dump unprofitable or indistinct brands.

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The ProductLife Cycle

the concept of the product life cycle applies toproduct categories, not to brands; it is relatedto the concept of diffusion of innovation

different products will have differently-shaped life cycle curves; will diffuse atdifferent rates

a product is normally perceived to pass

through four stages over its life cycle;introduction, growth, maturity, and decline

each stage requires different marketingstrategies

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Product LifeCycle Stages

Introductionmost risky andexpensive.

Growth

both sales and profits rise,often rapidly.

Maturitysales increase at a decreasingrate and profits decline.

Declinedemand drops, often becauseof another product development.

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Do

llars

Time in yearsLoss

0

Profit

Sales Volume

INTRODUCTION GROWTH MATURITY DECLINE

Product Life Cycle Curve

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Strategic Implicationsof the Stages

introductory stage: developing the market,creating awareness, reaching the innovators

growth stage: competition begins, sales

grow quickly, profits peak, marketpenetration

maturity stage: competition is intense, salesslow 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 ofLife Cycles length of the life cycle will vary across

markets; some are quite short and may begetting 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 allfour stages; they may fail in introduction

the life cycle must be considered in relationto a specific market; stage may vary acrossmarkets

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Managing theLife CycleSuccessful life-cycle management requirespredicting the shape of the curve and thensuccessfully 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 willextend the maturity stage; modify the

product, devise new uses, or design newappeals greatest challenge comes at the decline stage

which may result in product abandonment

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Part a - Extended

introduction stage

Part b - Fad

Part c - Indefinitematurity stage

Time in years Time in years

Time in years

Aggrega

te

sales

Aggre

gate

sales

Different Life Cycles

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Planned ObsolescenceFashion and Style

Planned Obsolescence: Technological or

functionalobsolescence; other

things do it betternow.

Style obsolescence:Still serviceable, but

looks out of datenow.

Style:A distinctive manner

of construction orpresentation in any art,

product or endeavour.Fashion:

Any style that isaccepted andpurchased bysuccessive groups ofpeople over a longperiod of time.

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Fashion-Adoption Process

Series of buying waves as a given style ispopularly accepted by one group afteranother.

Three theories of fashion adoption:

Trickle-down

a given fashion flows downthrough several socioeconomic levels.

Trickle-acrossthe fashion moveshorizontally and simultaneously withinseveral socioeconomic levels.

Trickle-upa style first becomes popular atlower levels and then flows upward.

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TRICKLE-

UP

Productadopted

first bylowersocio-economicgroup

TRICKLE-DOWN

Productoffered

first touppersocio-economicgroup

Product introduced at same timein all three types of stores:

TRICKLE-ACROSSExclusive high-pricedspecialty stores(boutiques)

TRICKLE-ACROSSMedium-priced departmentstores and specialty stores

TRICKLE-ACROSSDiscount stores

Fashion Adoption Theories in Action