What is the purpose of product mixing?

Some business comprises production lines which are clubbed together based on the characteristics which are similar in nature. The number of products being offered through these product lines constitutes the product mix. There are several reasons why product mix is important to an organization as far as small business organizations are considered.

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For example, The Coca-Cola Company has its signature Coca-Cola brand, featuring original Coca-Cola, Diet Coke, Coke Zero, Cherry Coke, etc. This would be described as a product line, while their product mix consists of their Coca-Cola, Dr. Pepper, Glaceau Smartwater, Sprite (and so on) product lines.

What is the product mix answer?

The product mix is the total range of product lines and types a company has on sale for its customers. 

Major elements of a product mix

A company’s product mix contains four main components.

• Length: The range of products available in a particular product line.

• Breadth: The number of product lines under a company.

• Depth: The options available in a particular product line, such as different quantities, sizes, etc.

• Consistency: How closely related product lines are to one another in their use, production,

  and distribution channels.

What is a product mix, and what is a product item?

A product item is a specific product version that can be designated as a distinct offering among an organization’s products. Put simply, while the Coca-Cola Company has a product mix, and the Coca-Cola labeled products would be a product line, a single can of Coca-Cola is a product item. 

Why are product mixes important?

Understanding the concept of a product mix can help your business in multiple ways. Keeping a well-maintained product mix will:

Address customer needs 

Offering a wide range of products means your business can cover multiple customer needs without losing sales to your competitors. If a customer can address all their needs with your company’s products, that customer will return again and again, knowing you offer just what they need.

Improve business image

Your product mix is a key factor in determining the image of your business. Keeping your product mix stable and familiar will help your customers understand what you do as a business, as well as what they should expect from you.

Provide focus

Utilizing the product mix concept helps you stay focused on your core business. It’s natural to want to expand your product mix as your business grows to reach a broader range of customers. However, by doing this, you may alienate your existing customers by offering products or services that only a small percentage of people actually need.

Inventory management

Maintaining inventory is tricky for any company, but even more so for a small business. Being a smaller business forces limitations on the number of products you can offer, so it’s vital to maintain a healthy product mix that reflects your core customers’ needs. Not only does this benefit your customer, but it also means you have less wastage when it comes to inventory management, as you’re only keeping the inventory you are selling.

Difference between product mix vs product line

The terms ‘product mix’ and ‘product line’ are often interchanged. And while they share some overlapping qualities, the two are actually very distinct.

So… when it comes to product mix vs product line, what’s the difference? 

• A product line is a singular line of similar products that are sold within a company.

• A product mix is the combination of all product lines sold by the business. Some companies may have multiple product lines contributing to a large product mix. 

When keeping product mix vs product line in mind, the key thing to remember is that a business needs to have a mixture of product lines to have a product mix.

A company can have many product lines, but only one product mix. 

6 key product mix strategies

As product teams will know, there’s no direct correlation between the number of products you build and how much success you see. Below are 6 key product mix strategies so that you can make the most of the lines you launch.

Expansion of product mix - Expansion of product mix is when a business increases its number of product lines. These new lines are often related to the company’s current product range but are unrelated to the present products. 

For example, if a beverage company introduces flavored water as a new product line, that would be an expansion of the product mix.

Contraction of product mix - Sometimes it pays to shrink your product mix to eliminate poor-selling items. Which products are bringing your overall mix down and reducing ROI in product development? Identify them and cut them out.

Deepening product mix depth - This strategy involves increasing product lines. Rather than adding new product lines, though, the business will look at more products that fit in with an existing product line. The result is a diversification of the product range.

Alteration of existing products - Here, existing products are changed or optimized to meet customer needs, rather than introducing new products.

Trading up - Trading up is when a company adds higher-priced items into its product line(s). This is designed to encourage more sales of mid-tier products and improve the prestige of the company. For example, when a software product launches a ‘Pro’ alternative.

Trading down - This is the exact opposite of trading up.; lower-priced items are added to the product line to increase sales.

How to perform a product mix analysis

So which of these key product mix strategies is right for you? Should you add new lines or diversify; trade up or trade down? The answer lies in your product mix analysis.

A product mix analysis looks at a range of go-to-market strategies to determine the best product mix at a customer, regional, or national level. 

To perform a product mix analysis, you need to start by defining your scenario. Scenarios are usually defined by editing a demand plan or via a scenario wizard that only uses the necessary variables. 

Once the scenario is confirmed, users will re-create the plan while taking into account every constraint of the system. If the scenario tasks you with changing the product mix at a regional or national level, you will need to re-optimize the supply plan alongside any changes. 

The re-optimized plan will establish the impact on financial performance. Users will be able to see P&Ls by business unit, product, and major customer/store type, which will allow them to compare the impact of the new scenario vs the original plan.

What is product mixing?

What is the importance of product mix and product line?

Why is product mix analysis important?

Why is it important to change the product mix?