Questions and Answers
What is a product mix?
The particular assortment of products a business offers to meet its market's needs and its company's goals.
What is a product item?
Each individual good, service, or idea that a business offers for sale is a product.
What is a product line?
A group of related product items is the product.
How do companies classify product lines? (Select all that apply)
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Describe the four product-mix dimensions.
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Why are product-mix decisions so important?
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Why would a company use an expansion product-mix strategy?
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What are the disadvantages of an expansion strategy?
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Why would a company use a contraction product-mix strategy?
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What are the disadvantages of a contraction strategy?
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Why would a company use an alteration product-mix strategy?
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What are the disadvantages of an alteration strategy?
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Why would a company use a trading-up product-mix strategy?
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What are the disadvantages of a trading-up strategy?
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Why would a company use a trading-down product-mix strategy?
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What are the disadvantages of a trading-down strategy?
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Study Notes
Product Mix Overview
- A product mix encompasses the assortment of products a business offers to fulfill market needs and company objectives.
- Each product offered by a business is referred to as a product item.
Product Lines
- A product line consists of a collection of related product items.
- Classification of product lines may include factors such as product class, customer group, distribution method, and price/quality.
Product-Mix Dimensions
- Product mix is defined by four dimensions:
- Width (number of product lines)
- Length (total number of products in the mix)
- Depth (variety of sizes, colors, flavors, models within lines)
- Consistency (relationship of lines in terms of end use, distribution methods, target market, and price range)
Expansion and Contraction Strategies
- Companies pursue expansion product-mix strategies to provide variety and meet customer demands for options.
- Disadvantages of expansion include increased costs in inventory, marketing, and the need for staff training on new products.
- Contraction strategies are used when a company loses customer appeal or aims to streamline offerings, with risks including financial vulnerability and competitor encroachment.
Alteration Strategies
- Alteration of existing products is favored to manage costs, as it is generally cheaper than developing new products and offers a higher success rate.
- Risks include high costs if an entire line is altered at once and potential competitive response if changes are made gradually.
Trading Strategies
- Trading-up is employed to elevate the company's image by introducing higher-end products, though it risks alienating existing customers and potentially decreasing sales of established products.
- Trading-down targets new market segments by adding lower-priced products, which may compromise the firm’s reputation for quality.
These strategies highlight the importance of careful decision-making in product mix management to balance customer satisfaction with business sustainability.
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Test your knowledge about the nature of product mix with these flashcards. Each card covers key concepts such as product mix, product items, and product lines. Perfect for anyone studying marketing concepts!
