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Setting Product Strategy
How can a company bui ld and manage i t s product mix and product l ine?
Presentation byDivyasree P K
IIT Madras
Productmixmix
N. Set of all products that a company offers for sale
Product mix comprises of multiple
PRODUCT LINES
N. Set of all related products manufactured by same company
Cigarettes Agarbattis
Lifestyle retailing HotelsDeodorants
Stationery & EducationFoodPersonal wash Food
P r o d u c t l i n e s
WIDTH
No. of different product lines in a company-----------------------------------------------------------DepthDepth
No. of variants of each product
CONSISTENCy
Extent of similarity within the product lines in terms of end use, production , distribution, etc
Product Line AnalysisCrucial to manage the product lines
1. Sales & Profits
2. MarketProfile
contribution
1. Sales & Profits
HigherProducts with
contributionHigher SalesProfits
Requires careful monitoring and protection
1. Sales & Profits
Products with low sales and profits and lower growth potential and lower growth potential SHOULD be dropped
2. MarketProfile
How the product lines fare in the market scenario
…Competition.Expansion avenues
&
Employ Product Maps to identify…
&Market Segments…
…And decide about Product Line Length & Product Mix Pricing
Product Line LengthNew linesNew linesStretching old linesFilling old linesOptimization
New Product Line
New lines to induce UP SELLING
New lines to induce CROSS SELLING
Divers i fy ing across mul t ip le economic segments to reduce r i sk f rom a vo lat i l e economy
Product Line Stretching
Increase the range
Down-market stretching
Movement from
middle to low marketmiddle to low market
WHY 1. Growth potential
2. Attack low-end competitors
3. Stagnating middle market
CautionAdopt appropriate strategy & pricing to prevent cannibalization
Up-market stretching
Movement to upper market
WHY 1. Growth potential
2. Higher margins
3. Positioning as full-line manufacturers
Two-way stretching
Titan Sonata Titan Exacta Titan Royale
Product Line Filling
New products within the current range
WHY 1. Incremental profits
2. Keep out the competition
Caution 1D o n o t o v e r d oElse r i sk cannibal izat ion & cus tomer confus ion
Caution 2Dif ferent iat ion wi th N O T I C E A B L E R E L A T I V E di f ference
Caution 3A C T O N M A R K E T N E E D , no t in ternal need
Brand Portfolio OptimizationOptimization
Continuous modernizationSelective featuringRational pruning
Microsoft and Intel continuously introduce advanced versions of introduce their products
CautionTime the product re leases appropr iate ly
N E I T H E R L A G , N o r B E Q U I C K
Feature
Low-priced product to attract customers
High end product to add prestigeHigh end product to add prestige
Good brand to offset loss from a weak one
90% profit from 25% of the brands. Hence..
75% Brand pruning by UNILEVER in 2003
Product Mix PricingProduct l ine pricingOptional feature pricingCaptive product pricingCaptive product pricingTwo part pricingBy product pricingProduct bundling pricing
Product Line Pricing
Progressively different prices for different brands of the same product
line
Optional Feature Pricing
Core product available relatively lower rate
Additional features available on extra
payment
Captive Product Pricing
Captive product
crucial to the functioning of main product
available at a premiumavailable at a premium
Main product
at low rates
Two part Pricing
Fixed PLUS Variable costs
By-Product Pricing
Value of by-product derived from the main product to facilitate lower prices for main product
Tar prices linked to that of oil
Product Bundling Pricing
Pure Bundling
Only BlueDartcartons are allowed
Mixed Bundling
Combo packet of a shampoo and cartons are allowed
for packaging if one chooses to use their courier service
shampoo and conditioner costs less than the sum of individual components
