Home Blog AIOU Solved 8407 Product Mix and Product Line

AIOU Solved 8407 Product Mix and Product Line

ACKNOWLEDGEMENTS

This postulation is devoted to Allah, my Creator and my Master, and envoy, Mohammed (May Allah favor and give him), who showed us the motivation behind life. My country Pakistan, the hottest womb; Allama Iqbal Open University, Islamabad; my second wonderful home; My awesome guardians, who never quit giving of themselves in incalculable ways, My dearest friend, who drives me through the valley of dimness with the light of trust and support, My cherished siblings and sisters; especially my dearest sibling, who remains by me when things look disheartening, My beloved Parents: whom I can’t compel myself to quit loving. All the general population in my life who touch my heart, I commit to this research.

ABSTRACT

A product line is one line of similar products that are sold within a company, whereas a product mix is the combined total of all the product lines sold in a company. Some companies have many product lines and very large product mixes, and others are much smaller depending on the variety of products they sell and how much financial support they have. There are a few factors that determine the product line of a company and those include price range, functionality, target audience and brand. Products with a similar price range might be in one product line, and products with a completely different function and target audience are in a different product line altogether. Some factors that influence the product mix include the company’s age, financial standing and brand identity. If a company is more established, it is more likely to have a higher product mix than a company that has only been open for a few years because it already has a brand image, a target audience who buys its products and an understanding of which products work best for their company. Cross-selling refers to selling products that are related or might be of use to a customer already buying another product. Cross-selling is likely to be used more frequently within the product mix of a company when selling to customers. For example, a business that sells technology products may have many product lines and can cross-sell between them. The tech business can suggest that a company purchasing laptops from them also purchase a variety of laptop cases because consumers may want to buy a laptop case with their laptops. If a retailer was purchasing laptops from a company that only had one product line and sold only laptops, there would be less cross-selling because products would be so similar.

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Introduction

Many businesses that sell multiple products use product lines and product mixes to monitor the different products they produce and sell to customers. While a product line refers to related products sold in a business, the product mix is the total number of all products a business sells. Using them in your business can help determine which products have been effective in producing more sales, so you can create less of some products and add more that are likely to benefit the company in the future.

A product line is a group of similar products manufactured and sold by one company. Many larger and more established companies have multiple product lines because of their financial capabilities and an understanding of customers’ needs, while newer companies tend to have fewer.

Companies place products into product lines depending on characteristics such as functionality and price range. For example, a company that sells nail care products may have one product line that sells different colors of nail polish and another product line that sells multiple types of nail polish removers. The nail polishes have the same function, so they are in the same product line. Neither the polish nor the polish remover is used for the same purpose, so they are in different product lines.

The product mix consists of every product a business develops and sells. Within a product mix, there are four dimensions—width, length, depth and consistency. Here is a brief description of each dimension:

The width of a product mix refers to the total number of product lines a business has. For example, if a breakfast food company has a product line for hot cereal, cold cereal and breakfast snacks, it would have a width of three because it has three product lines.
The length includes the total number of products in the mix. For example, if the breakfast food company had three product lines and each line had four products, the length of the mix would be 12.
Depth is the number of variations within a product line. Variations consist of different sizes, flavors, colors or other distinguishable characteristics. If the breakfast food company’s product line for hot cereal included strawberry, apple, banana and cinnamon flavors, the depth of that particular product line would be four.
The consistency of the product mix refers to how closely products relate to each other in terms of use, distribution channels or type of consumer. The breakfast food company is likely going to have a higher consistency of product lines than a retail company that sells shoes, clothes and home goods.

A product line is a group of related products all marketed under a single brand name that is sold by the same company. Companies sell multiple product lines under their various brand names, seeking to distinguish them from each other for better usability for consumers.

Companies often expand their offerings by adding to existing product lines because consumers are more likely to purchase products from brands with which they are already familiar.

A product line is a group of connected products marketed under a single brand name by the same company.
Companies sell multiple product lines under their various brand names, often differentiating by price, quality, country, or targeted demographic.
Companies often expand their offerings by adding to existing product lines because consumers are more likely to buy products from brands they already know.

Product lines are created by companies as a marketing strategy to capture the sales of consumers who are already buying the brand. The operating principle is that consumers are more likely to respond positively to brands they know and love and will be willing to buy the new products based on their positive experiences with the brand in the past.

For example, a cosmetic company that’s already selling a high-priced product line of makeup (that might include foundation, eyeliner, mascara, and lipstick) under one of its well-known brands might launch a product line under the same brand name but at a lower price point. Product lines can vary in quality, price, and target market. Companies use product lines to gauge trends, which helps them to determine which markets to target.

The Evolution of Product Lines

Companies add new items to their product lines, sometimes referred to as a product-line extension, to introduce brands to new customers. Consumers who have no interest in a company’s sporting good products, for example, might be more interested in buying its product line of energy bars or sports beverages. Extending product lines allows companies to maximize their reach.

The way that companies use product lines is clearly evident in the auto industry. Auto manufacturers famously produce various product lines of vehicles to reach the widest possible range of consumers.

For this reason, they produce lines of economy vehicles, environmentally-friendly vehicles, and luxury vehicles all under their leading brands. Some are marketed to families, some to individuals, and others to the young.

Special Considerations

Product lines allow companies to reach regions and socioeconomic groups, sometimes even worldwide. In some cases, such as the cosmetic industry, companies also launch product lines under their best-selling brands to capture sales from consumers of various ethnic or age groups. Multinational corporations, such as restaurants, often launch product lines specifically for the countries in which they operate, as is the case with fast food restaurants operating in Asia.

Examples of Product Lines

Microsoft Corporation (MSFT) as a brand sells several highly recognized product lines including Windows, Office, and the Xbox. Nike Inc. (NKE) has product lines for various sports, such as track and field, basketball, and soccer. The company’s product lines include footwear, clothing, and equipment. PepsiCo (PEP) owns, among many other lines globally, Frito Lay, Gatorade, Quaker Oats, and Tropicana. The various product lines for Starbucks Corporation (SBUX) include coffee, ice cream, and drinkware.

Practical Study

In marketing, the number of product lines offered is referred as the width of product line and mix. Product mix, also known as product assortment, is the total number of variety of products that a firm sells to their customers. It measures the total number of product lines. Some companies will focus solely and sell only one type of product that they specialize in. Having said that, some would offer numerous types of products for diversified markets, depending on the size and objectives of the entities. Each approaches’ results vary based on many factors including location, market, trends, etc., therefore business should carefully consider their product mix. The width of product line and mix is one of the four dimensions of product line and mix along with the length, depth and consistency of product line and mix.

Width

As mentioned above, the width of product line and mix is referred to as the total number of product lines that the company offers. A diversified product mix can target the maximum number of customers, however, such numbers of product lines requires much attention and focus as each product line targets different groups of consumers and involves individual strategy and management. Although specialization of products (narrow product mix) might be easier for businesses to operate and manage, it reduces the ability to reach out to diverse markets as they fail to offer sufficient options for consumers to cater to their “needs and wants”.

Length

The length of product line and mix refers to the total number of products sold by a company. A product line consists of many similar products defined by its functions and customer market while short product line consists of fewer related products. Longer product lines may fulfill the satisfaction of customers that said, overly dense product lines may result in competition within the same line and lead to loss of revenue and customers. If product lines are too short, consumer options are limited, forcing them to switch to competitors with a longer range of products.

Depth

The depth of product line and mix pertains to the total number of variations of product in a product line. For example, a brand would be considered to have a depth of four if it sells two sizes and two flavors of soda.

Consistency

The consistency of product line and mix refers to how closely associated the products in the same product line are to each other, in terms of their use, production and distribution. A business’ production mix could be very consistent in distribution, yet extremely different in other areas such as use. For instance, a company may be selling health related items such as multi-vitamins tablet and magazines. Although both products fit into the same product line, they are completely dissimilar in use while one is editable and the other is not.

When companies add a new item to a product line, it is referred to as the product line extension. The purpose of it is to attract new customers who may not be familiar or satisfied with the current standard product line. For example, when a lifestyle pharmacy decided to add in a high protein muesli bar into its current product line of muesli bar. Companies with an effective product line can employ product line extension in order to reach new demographic customers in different geographic areas.

When a business adds a line extension to the product line and if it is of a higher quality than the current products, it is considered as trading up or an upward stretch. Alternatively, if the new added item is of lower quality compared to other existing products, it is known as trading down or a downward stretch. These stretches are known as product line stretching. Supermarkets often apply product line stretching to its product lines by offering different grading of their own brand products to ensure all markets are covered for maximum interest from customers. In addition when companies add new varieties of existing product it is known as product line filling.

Product line pricing is a product pricing strategy, used when a company has more than one product in a product line.^[10] It is a process that traders adopt to separate products in the same category into various price groups, to create different quality levels in the customers’ minds.

For instance, vehicle manufacturers produce their vehicle in different models including economy models, environmental models, luxury models and more. Each of them has an individual cost or price to display the difference in levels. With that being said, in order for any pricing techniques to be effective, demand elasticity, the whole product mix, product positioning strategy and the product life cycle have to be put into consideration to determine the best price for each product.

Price Lining

Price lining is a method of pricing different products for a limited number of prices. This strategy allows ease of administering and companies are able to predict their markets of customers and profits much easier. Dollar Store is an excellent example of price lining as most products sold there are $1.

Captive Pricing

Captive pricing is a strategy drawing consumers’ interests and encouraging purchases by offering a basic product for a really low price, however, they will have to purchase additional items in order to obtain the full value of the product they have received. Although the retailer might lose profit on the first sales item, they will manage to gain it back from the additional products that customers buy. For example, razor blades and razors manufacturers usually sell a razor handle for an unbeatable price while selling additional blade cartridges at a much higher price. Captive pricing is most effective when there are no other similar products from competitors in the same price range.

Bundled Pricing

Bundled pricing is the approach of selling products and their accessories or other options as one product for one price. Consumers will not need to purchase each item separately but one bundled item and priced as one product. This would also be appealing to customers as normally they would be on sale and have the original price still tagged on the product to emphasize the price difference. For instance, retailers will offer a bundle deal for purchasing a new computer with its accessories, such as keyboard and mouse pad.

Bait Pricing

Bait Pricing, also known as “Bait and Switch” is often considered unethical and sometimes illegal. It involves promoting items at a really low price to entice customers, with only limited supplies. Customers will come into the store looking for the advertised product and find out is out of stock or doesn’t even exist, and afterward be encouraged to purchase a comparable, higher-priced product that is available in store.

Leader Pricing

Similar to Bait pricing, retailers use leader pricing to entice customers to come into the stores by advertising items, the loss leaders, at a low price. When they arrive at the stores aiming for the promoted products, they often end up buying additional products at their full prices. Therefore, businesses earn their profit off of the unplanned buying decisions by customers besides the loss leaders.

Examples of product lines

Below are some product line examples to help you better understand what a product line is and how companies can benefit from it:

Great Hair Care Products

Great Hair Care Products offers a brand of economical shampoos and conditioners that are sold in convenience stores worldwide. In addition to shampoos and conditioners, the brand recently performed product line extensions to add two new products: a hairdryer and a texturizer. Because these products were launched under the existing brand, consumers know they are likely to be affordable and available in stores where they would normally purchase Great Hair Care Products’ shampoo and conditioner. Shoppers who usually buy the existing brand of shampoo and conditioner may be more inclined to buy the new hairdryer or texturizer should a need for such products arise.

Wise Tech Company

Wise Tech Company is an internationally renowned brand that produces computers and smart technology. Every year around the same time, they announce a new smart product for their product line. Because the brand is known for high-quality hardware and software, fans of the company stand in line to get their hands on the most recent product offerings from Wise Tech Company. This brand recognition offers Wise Tech Company a competitive advantage in the technology market.

Each product release allows them the opportunity to expand their market share and surprise and delight new customers who enter the store to try new products. Part of the product line marketing strategy is that products are widely available for use in stores, so visitors can try a product before they buy, leading to more customer satisfaction with the product line.

Family Grocery

Family Grocery is a retail chain of grocery stores that offers its own product line of natural foods in stores. When Family Grocery announced the natural foods product line, they were able to advertise it to existing customers. Having regular customers who know the brand meant more people would instantly recognize that its natural food product was of high quality.

This brand association with quality helped the new product line grow, even though Family Grocery had never before launched their own product line.

A product-line extension is when someone adds new products into their product line to try to entice new customers to purchase. For example, consider a company that produces whey protein powder for bodybuilders. That product is largely purchased by male bodybuilders, so to widen their audience and attract new customers, they may develop a nutritional supplement for women. Companies use product lines to diversify their clientele and attract more people. They expand existing product lines to get their existing customer base to buy more.

Marketers also use product lines to gain a competitive advantage. For example, if two rival coffee companies are competing for the same business, one company might expand its product line to include tea to attract additional customers who prefer herbal tea to coffee.

When it comes to marketing, product lines sometimes make up part of an overall marketing strategy. To structure a campaign around a product line, goals and objectives should be strategically aligned with growing the new brand. In many cases, a product line manager is the marketer responsible for structuring such a campaign.

Product line extensions are a popular tool that product managers use to extend the offerings of a brand to its customers. When a product line extension occurs, new products are added to an existing product line. Product line extensions are popular for the following reasons:

Reduced risk: When a brand already has recognition, it’s less risky to release a new product. You have an existing base of people to market to, which makes for a more favorable launch environment.
Loyalty: Customer loyalty adds a bonus to new product lines because customers are more likely to purchase from companies they are already purchasing from.
Existing branding: Existing branding also helps product line extensions as it helps customers become familiar with a brand. Once brand recall exists, a new product can also benefit from that brand recognition.
Increase market share: The introduction of a new product for an existing brand increases the company’s market share with its customer base.
Versions of product: Releasing multiple versions of the same product is a strategy that produces less risk because it allows customers to start with a basic product and get more features as they are introduced.

Introduction: Product Marketing Questions

Product marketing in a business addresses five important strategic questions:

What products will be offered (i.e., the breadth and depth of the product line)?
Who will be the target customers (i.e., the boundaries of the market segments to be served)?
How will the products reach those (i.e., the distribution channel and are there viable possibilities that create a solid business model)?
At what price should the products be offered?
How will customers be introduced to the products (i.e., advertising)?

In this unit, you’re going to learn about the relationship between the breadth of the product line and the product mix.

Product Line Breadth

The breadth of the product mix consists of all the product lines that the company has to offer to its customers. If we take P&G, for example, the breadth of the major product lines would consists of hair products, oral care, soaps and detergents, baby care, and personal care. You may also hear the product line breadth referred to as the product width, product assortment width, and merchandize breadth.

Data Collection Method

The product mix of a company is generally defined as the complete set of all products a business offers to a market. The product mix (sometimes called “product assortment”) is made up of both product lines and individual products.

A product line is a group of products within the product mix that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets or fall within given price ranges.

An individual product is a particular product within a product line. It is a distinct unit within the product line that is distinguishable by size, price, appearance, or some other attribute. For example, all the courses a university offers constitute its product mix, courses in the marketing department constitute a product line, and the principles of marketing course is a product item.

Now, there are four dimensions associated with a company’s product mix and the product line breadth is one of them. The other three are the length, the depth, and the consistency.

Going back in our P&G example we saw five different product lines: hair products, oral care, soaps and detergents, baby care, and personal care. This means that the product mix breadth is five.

Price Lining is a retail marketing technique where Products and services of the same category are grouped in the different price range based on their functions and quality. It is a technique to help consumers to make buying decisions easily based on their requirements and budget.

The price lining technique is also known as the Product line pricing technique. The price lining technique is commonly used by retailers in their store for the display of the products of the same category. The products are displayed based on their level of quality.

The price lining technique is helpful for customers with different purchasing capacity and customers with different requirements. Customers can easily pick the products that they can afford without seeking the help of the salesperson.

The price lining technique has many benefits for both retailers and consumers.

As retailers can generate more revenue by adopting this technique because most customers end up purchasing products at higher prices as they believe that more the price, the better will be the quality of the product.

For example, if you sell water purifier at a different price, then you will observe that the sale of water purifier will be high as compared to the sale of water purifier with lower prices.

Let us take the example of online website XYZ, which provides Coding courses. The courses on the website are divided into different levels, such as basic, Gold, and Platinum. The Basic level of the course contains limited study material and no online practice sheets. The basic course is free of cost and the gold level, of course, is consist of more features and can be accessed at $25 per week. And similarly, the platinum level, of course, consists of maximum features and also provide online practice and certification for the course and the cost of the platinum level is $40 per week. Students who want to take the coding course can select the level of the course based on their requirements and their budget.

Another example of price lining is an example of Oneplus smartphones. For example, the latest version of Oneplus phones is Oneplus 7 and Oneplus 7 Pro. The price of Oneplus 7 and Oneplus 7 Pro is 499 pounds and 699 pounds respectively. One plus seven pros has better features such as the battery of Oneplus 7 Pro 4000mAh, and the battery capacity of Oneplus seven is 3700mAh, and Oneplus 7 Pro comes with Triple rear camera and Pop upfront camera whereas the Oneplus 7 has Dual camera with a notch front camera.

We can also take the example of price lining in hospitality. There are different types of rooms that at different prices such as Suite, Family suite, Dual occupancy, single occupancy, etc. A suite is a set of rooms for a single person. A family suite is a set of rooms designated for family and rooms with dual occupancy can be occupied by two people, and similarly, rooms with single occupancy are for a single person. Even there is a difference of facilities in these rooms, two vary depending on the price you are ready to pay.

Conclusions and Recommendations

If you want to learn about more examples of price lining, then visit a retail store near your home and look at the product shelf. You will find hundreds of examples of price lining.

Advantages of Price lining

Price lining provides options to consumers for a single product. They can choose from the range of products on the basis of their budget and on the basis of the particular features that they want in that product.
Price lining is also beneficial for the companies as they can generate high profits without making huge investments as people usually prefer to products with high prices because they have a single that a product with high price is better in quality.
Even though companies offer various products, but marketers only have to focus on a single brand. Therefore, price lining reduces the expense of marketing and advertising.
There is lower labor, and overhead cost as different products can be produced using the same machinery, and the same labor can produce products with different features.
Price lining helps in reducing inventory as producers know which product to produce more to fulfill the demand.

Disadvantages of Price Lining

Price lining marketing technique is designed only focusing on the price of the products.
Even though price lining helps producers to generate Extra revenue, it is put a negative impact on the sale of the expensive product during inflation as people might start buying a cheaper product with a low price to cut the cost.
Change in the market trends or inflation might leave you with additional inventory.
It can also put a negative impact on the loyal customers of the brand if they don’t find products worthy of the price.
Price lining shows that brand doesn’t treat their customers equally as not all customers can enjoy the premium features, and even though they have held on the product of your brand, they will always feel less. For example, even if a person possesses an iPhone if it is not latest, he cannot enjoy the premium features of the iPhone.

References

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AIOU Solved 8407 Product Mix and Product Line