5.7:
Product Mix Decisions
A product mix, or product portfolio, is a complete assortment of product lines that a company offers to its customers. For instance, P&G maintains ten product lines, with its product mix containing several individual items.
A product mix is defined by four primary dimensions. These are width, length, depth, and consistency.
Width signifies the number of distinct product lines a company offers. For example, as of 2023, P&G's product width is ten.
Length is the total count of items within all the product lines.
Depth refers to the number of product variants within a product line. For example, the different product variations of Oral-B illustrate the depth.
Consistency reflects how closely related product lines are, regarding usage, production, and distribution.
P&G's product lines exhibit consistency as all their consumer goods utilize similar distribution channels.
A diverse product mix increases market share and reduces risk, boosting competitiveness and profits.
Companies periodically refine this mix, removing underperforming lines and adding promising products to maintain focus.
5.7 Product Mix Decisions
A product mix refers to the total assortment of products that a company offers for sale. It encompasses four dimensions:
- • width (number of different product lines)
- • length (total number of items within product lines)
- • depth (number of variants of each product)
- • consistency (closeness of products in terms of usage, production, distribution)
Product mix decisions are significant as they determine a firm's market positioning and potential profitability. Brands can optimize their product mix to meet diverse customer needs, maximize sales, and manage risk. For instance, a well-balanced product mix can reduce earnings volatility.
The width and length can help a company reach various consumer segments, while depth allows it to cater to diverse customer preferences. Conversely, consistency influences operational efficiency.
Driving factors for product mix decisions include market competition, environmental considerations, and firm-specific variables such as manufacturing flexibility and throughput per day. For example, market size and competition can influence an exporter's product mix. Meanwhile, environmental concerns can shape the optimal product mix.
Companies keep varying the product mix length, width, and depth to cater to diverse customer needs, exploit new market segments, enhance competitiveness, and maximize profitability.