product mix strategy
TRANSCRIPT
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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