Product Mix & PLC.pdf

Product Mix? Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products...

Product Mix? Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services. Elements of Product Mix Product Line: A product line refers to an array of related products under the same brand. A product line is an array of related products. Products under a product line can be related by functionality, target market, price range, or brand.  Product line depth refers to the number of products offered under a product line. Product Width: Total No of Product Lines Product Length: Total No of Products Example of a Product Mix Let us take a look at a simple product mix example of Coca-Cola. For simplicity, assume that Coca-Cola oversees two product lines – soft drinks and juice (Minute Maid). Products classified as soft drinks are Coca-Cola, Fanta, Sprite, Diet Coke, and Coke Zero, and products classified as Minute Maid juice are Guava, Orange, Mango, and Mixed Fruit. Importance of a Product Mix The product mix of a firm is crucial to understand as it exerts a profound  impact on a firm’s brand image. Maintaining high product width and depth diversifies a firm’s product risk and reduces dependence on one product or product line. With that being said, unnecessary or non-value-adding product width diversification can hurt a brand’s image. For example, if Apple were to expand its product line to include refrigerators, it would likely have a negative impact on its brand image with consumers. In regard to a firm expanding its product mix: Expanding the width can provide a company with the ability to satisfy the needs or demands of different consumers and diversify risk. Expanding the depth can provide the ability to readdress and better fulfill current consumers.  Product Lines(PLs): Related Products are grouped in a PL Source: https://www.nestle.in/brands Case Discussion: Product-Line Strategy at Porsche: The Effect of New Models on the Porsche Brand and the 911 Discussion Questions: How does Porsche define its market? Within that market, describe Porsche’s target market segment and positioning strategy. Why did Porsche have trouble in the 1990s? Historically, what has Porsche tried to achieve with brand extensions? Why have these extensions been withdrawn from the market? Product life cycle (PLC) The product life cycle (PLC) is the progression of a product through five distinct stages—development, introduction, growth, maturity, and decline. The concept was developed by German economist Theodore Levitt, who  published his Product Life Cycle model in the Harvard Business Review. The model is used widely today. The product life cycle is the time from the product concept through its eventual withdrawal from the market. The product life cycle is used for decision-making and strategy development throughout each stage. The PLC concept is widely used in marketing and product management to understand how products evolve and how companies can adjust their strategies to maximize sales and profits. Product Life Cycle PLC Stages and Characteristics  Further Readings: https://hbr.org/1965/11/exploit-the-product-life-cycle https://business.adobe.com/blog/basics/product-life-cycle-stages-and how-to-use-them Marketing Strategy at Various stages of PLC Introduction Stage This stage involves introducing a new and previously unknown product to buyers. Sales are small, the production process is new, and cost reductions through economies of size or the experience curve have yet to be realized. The promotion plan is geared to acquainting buyers with the product. The pricing plan is focused on first-time buyers and enticing them to try the product. Introduction phase-Some Strategies ❑ Raising product awareness through advertising/word of mouth to establish a clear brand identity. ❑ Offering the product at a discount – penetration pricing to tempt customers to try the product or at a high price if it’s an innovation to recover R& D cost. ❑ Target early adopters and influential market leaders. ❑ This phase will not be profitable because costs and revenue are relatively low. ❑ Connect with the right partners to promote your product ❑ Set up consumer tests or provide samples or trials to key target markets Growth In this stage, sales grow rapidly. Buyers have become acquainted with the product and are willing to buy it. New buyers enter the market and previous buyers come back as repeat buyers. Production may need to be ramped up quickly and may require a large infusion of capital and expertise into the business. Cost reductions occur as the business moves down the experience curve and economies of size are realized. Profit margins are often large.  Competitors may enter the market, but little rivalry exists because the market is growing rapidly. Promotion and pricing strategies are revised to take advantage of the growing industry. Some Strategies Firms must capitalize on growth to extend product sales from small retailers to big supermarkets. The firm can adapt to consumer feedback and offer new features/better consumer support. Maintaining product quality and adding features or support services for the product Maintaining pricing to increase demand for the product Increasing distribution channels to cope with demand Aiming promotion at a wider audience Maturity In this stage, the market becomes saturated. Production has caught up with demand and demand growth slows precipitously. There are few first-time buyers. Most buyers are repeat buyers. Competition intensifies, leading to aggressive promotional and pricing programs to capture market share from competitors or maintain market share. Although companies try to differentiate their products, the products actually become more standardized. With peak market penetration, the firm may increase prices to increase profitability. However, if the market is very competitive, the firm may need to keep prices low to defend its market share. Some Strategies ▪ The firm may improve the product to gain market differentiation and extend the maturity period. ▪ The firm may need to enhance product features to make it more appealing than competitors’ ▪ The firm may need to lower their pricing due to increased competition ▪ Distribution is becoming more intensive, and you may need to offer incentives ▪ Firm may need to focus your promotion on the difference between existing products Decline In the decline phase, buyers move on to other products and sales drop. Intense rivalry exists among competitors. Profits dry up because of narrow profit margins and declining sales. Some businesses leave the industry. The remaining businesses try to revive interest in the product. If they are successful, sales may begin to grow. If not, sales will stabilize or continue to decline. Some Strategies  Maintain the product in the hope that your other competitors will withdraw their versions before you, which may create an increase in demand again Reduce your costs and find another use for the product - entering into another niche area could increase profits Reduce marketing support, 'harvest' the product, coast along until profits dry up and then discontinue the product Discontinue the product when your profit disappears, or when you unveil a successor product Determining Stages of PLC The following are some key indicators to help determine a product's stage in the life cycle: Sales: Sales growth is an essential indicator of a product's stage in the life cycle. During the growth stage, sales typically increase rapidly, while during the maturity stage, sales growth slows down. Market share: The market share of a product can also provide insight into its stage in the life cycle. A product's market share may increase during the growth stage, while it may decrease during the decline stage.  Competition: The level and intensity of competition are another important indicator of a product's stage in the life cycle. There may be little competition during the growth stage, while competition increases during the maturity stage. Industry trends: Observing trends in the industry and market can also help determine a product's stage in the life cycle. For example, introducing new products or changing consumer behavior may indicate a decline in the product's life cycle. Changing PLC Stages through Positioning  Source: HBR (Forget-the-product-life-cycle-concept) Reverse Positioning Reverse positioners assume that even though customers do want something more than the baseline product, they don’t necessarily want an endless  parade of new features. Such firms make the heretical decision to step off the augmentation treadmill, shedding product attributes the rest of the industry considers sacred. Once a product is returned to its baseline state, reverse positioners supplement the stripped-down product with one or more carefully selected attributes typically found only in a highly augmented product. This unconventional combination of attributes allows the product to assume a new competitive position within the category and move backward from maturity into a growth position on the life cycle curve. Consider these cases: Ex: Reverse Positioning: IKEA Store When consumers visit a typical IKEA store, they find that there is no in store sales assistance, that the variety is limited (IKEA’s furniture comes in just a few basic styles); that there is no delivery option (buyers must grapple with heavy boxes on their own); that most of the furniture requires assembly; and that durability is not to be expected (IKEA works to  convince buyers that furniture should be replaced often. Selected value proposition with a store environment and services virtually unheard of among typical low-end participants, stores with an airy, ultramodern look. Customers can drop off their children at a beautifully designed, company operated daycare center while they shop. They can stop for lunch at a delightful café. And they can purchase items besides furniture—brightly colored housewares and cleverly designed toys unavailable at most other furniture stores. Breakaway positioning Breakaway positioning: A product escapes its category by deliberately associating with a different one. Marketers leverage the new technology’s conventions to change how products are consumed and with whom they compete. Ex: Swatch Watch  Before Swatch launched, Swiss watches were marketed as jewelry. They were severe, enduring, expensive, and discreetly promoted. A customer bought only one, and it lasted a lifetime. Swatch define its watches as playful fashion accessories. They were fun, ephemeral, inexpensive, and showily promoted. And they inspired impulse buying—customers often would purchase half a dozen in different designs. Their price—$40 when the brand was introduced expanded Swatch’s reach beyond its default category (watches as high-end jewelry) and into the fashion accessory category, with different customers and competitors. Swatch’s breakaway positioning also disrupted the watch category by creating a fashion accessory subcategory. Stealth Positioning They conceal the true nature of their products by affiliating them with a different category. This is a powerful marketing strategy when a category is somehow tainted. Consumers may feel intimidated by products in the category (as can be the case with new technologies) they may be skeptical of the products because previous offerings have failed to meet expectations, or they may have personal objections to products or companies in the category. By using  stealth positioning, companies can, in effect, sneak products into the market and gain acceptance that might otherwise prove elusive. It can give products a fresh run at the life cycle and keep them from languishing—or dying out- right—in the introduction phase. Ex: Stealth Positioning Sony’s solution was to stealth position its product. Rather than set consumers up to be disappointed by an inadequate household robot, Sony positioned the product as a lovable but otherwise useless pet. Although buggy and unpredictable, the doglike AIBO was an immediate hit. Sony AIBO Dog Please Visit: Sony AIBO (https://us.aibo.com/)