Product Mix Explanation

The product mix also referred to as product assortment, is the entire combination of one or more product lines a company produces and offers to the consumer.

A company is free to have one or more product lines in operation having varied products in each of the projects of lines; All the lines put together will result to form the product mix of the company.

Width of Product Mix refers to the number of product lines that a company offers. For instance, if a company produces clothes and apparels, Jewellery and accessories, home decor and stationery, the width the product mix of the company is 4.

Depth of Product Mix refers to the different product variants within a product line, the company produces and offers for sale. In other words, the variation in one particular line on the basis of size, flavor, taste or other distinct features is the product mix depth. For example, if a company sells a bar of chocolate in 4 different flavors and 3 different quantities, its depth will be 12.

Length of Product Mix refers to the sum total of all the products of all the product lines. For example, if a company produces footwear and cosmetics and the classification of footwear is wedges, heels, sneakers, flats, and sleepwear; for cosmetics is eyeliner, nail varnish, lipsticks and foundation, the length will be 9.

The cohesiveness of Product Mix i.e. the cohesiveness of the products of a product line with regard to their final destination, for example, the same distribution channel.

Importance of Product Mix

Risks and uncertainties are inevitable and not being able to cope up with it would lead on to the closure of any organization. A great deal of strategy Product Mix pdf is yet another best possible way past all the risks, provided theoretically.

Diversifying in terms of selling and manufacturing, as in selling a variety of products rather than depending upon the profits from one product reduces risks of failure and increases profit potentials. This way the company will survive even if the demand for one product falls off in any way.

Hence, an analysis is to be made upon the best possible mix of diversified products which are highly in demand presently or will rise into fame in the future.

The Distinction Between Product Mix And Product Line

Product Mix is a vast concept as compared to Product Line. Product Mix has a number of components which when put together will help derive the said company’s Product Mix.

The components are length, width, depth, and consistency, and can be further explained as discussed above. To sum up, Product Mix is the combination of all the product a company manufactures and sells, irrespective of any basis of distinction.

On the contrary, Product Line is a smaller concept and refers to one single line of product a company deals in. Products falling under the said the similar line is similar in terms of uses and functions.

A company can deal in one product line or numerous product lines altogether. All the product lines of a company together form the product Mix of the company. Hope this settles the Product Mix vs Product Line Argument.

Tips to Improve Product Mix

There is a fine line between a particular product a customer wants and the other similar product making their way into the market. This line can forever be dodged, and it can happen at any point of time and that is the uncertainty which resides in the market.

Companies need to make sure that their customers’ demands are met, alongside the profitability of the firm is as well met and boosting. It is necessary for companies to come up with a diversified product line entering into various kinds of markets.

Because the customer’s needs to keep changing and it would be very difficult for the firm to keep up the competition with just a single line of product. In short, the product mix needs to be improved.

A few elements of the product mix, which can be directly influenced to improve the product mix:

1. Product Modification

Modifying a product means, taking into consideration the product products the company deals with and finding the flaws they have, then modifying them by changing the bads with the goods.

A proper survey can be carried out which would help derived the shortcomings of the products and the reason for the quantity left unsold.

Such factors should all be taken into consideration and replaced with all the good features which would attract the target customers and also satisfy them at the same time.

2. Product Quality

Quality is one such thing customers crave for, no customer would ever want to settle for a poor quality product until and unless offered to them for free.

If long term profits are what you aspire to attain, the product’s quality needs to be at the best always. If it already isn’t, measures should be taken in order to improve it, with the assistance of material properties and technology.

  • Material Properties (Material)
  • Technology
  • Use depth
  • Ergonomics (in 70’s / 80’s)

3. Product Packaging

Products must be packed keeping in view safety along with splendid looks. Customers must be happy the moment they receive the product and also the product must be safe and sound.

  • Protective function
  • transport function
  • Information function
  • Basic utility function
  • Additional benefit function
  • Recycling function

4. Product Service Support

The transaction doesn’t end the moment the customers receive the product, it goes on for a long time often referred to as the after-sale services. Customers must be provided with quick and efficient after sale services forever.

  • Service / Support
  • Guarantee (with innovation = security)
  • Advice (KD self-information)
  • Mediation (B2B contacts, maintenance)
  • Training (external, internal)

5. Product Image

Creating a benchmark in terms of branding is essentially convenient to boost up sale. Hence, firms must perform proper branding, trying to create a reputed brand in itself.

  • Branding
  • Image Transfer

Product Mix Example:

When was the last time you visited a bakery?

Of course, we all know the typical product groups of a bakery!

On the counter lie magazines, in the delivery the rolls, the cake, and the bread and in the background the coffee maker is buzzing.

Did you ever notice why you are almost always asked when paying your fuel bill – “And, may it still be a coffee”?

Why is that?

The answer is as always very simple.

At the so-called gross yield 1 (= selling price – direct material use) of the respective product group.

Let’s take a coffee to go!

Sometimes it really tastes like running away!

A little coffee + 0.2 L of water, that was it!

The black mixture then costs between 2.30 € and 3.30 €, the direct use of materials is, we are generous, including cups 0.20 €. A newspaper, on the other hand, is bought by the bakery for the extension of the assortment, there the material used by the purchase is very high, with the bread or the bun people have to get up at 5 even in the morning, knead the dough, etc. etc….

These 3 product groups deliver their individual gross yield to the overall result. Why are new “Starbucks” sprouting up everywhere – quite simply, they are money printing machines.

But what if tomorrow was scientifically proven that coffee would lead to hair loss?

No one would drink more coffee, outside of those who already have no hair left. This, in turn, would mean that a very high-margin sales segment would result in a change in the product mix. If the cost structure remains the same, the relative profit of your bakery will decrease.

Related article: Product pricing

Business Guide Blog Tip:

They do not have a bakery, but product groups with different gross yields. You can quickly determine these gross profits as part of a product profitability calculation! No?

Then you should have such an income statement introduced or implemented.

There is a rough rule of thumb in the manufacturing industry which states that the gross yield 1 (= turnover – material input) should be about 40% -50% across all product groups.

  • Do you prove valuable production capacity with products that generate a very low gross profit 1?
  • How do you control sales, sales or profitability?

The introduction of such a profit and loss account creates a lot of transparency and provides valuable information for corporate management.

Please ask your controller.

I drink now the nice clear mineral water, have fun with the analysis!

See also: What is Services and goods – characteristics and difference

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Hitesh Karpe is a founder of and running his (Food manufacturing) family business as well. He is well acquainted with the knowledge of business fundamentals & management, business expansion & process, business finance & financial analysis, people management, sales & marketing, and Leadership. Also, he writes the articles on the above topics with the intent to help the people to succeed in their business and professional careers.

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