Managing Product Lines
A company has several product strategies at its disposal, with respect to the width, depth, and consistency of its product mix. Most of these strategies involve a change in the product mix. In this section, we will analyze different types of product line strategies. Major product line strategies are as follows:
- Expansion of Product Mix
- Contraction of Product Mix
- Alteration of Existing Product
- Development of New Uses for Existing Products
- Trading Up and Trading Down
- Product Differentiation and Market Segmentation
Table of Contents
Expansion of Product Mix
Expanding the line may be a valid decision if it is in an area in which consumers traditionally enjoy a wide variety of brands to choose from and are accustomed to switching from one to another; if the competitors lack a comparable product or if competitors have already expanded into this area. However, the main limitation in expansion is the availability of sufficient finance, time, and equipment.
Increasing the number of lines and/or the depth within a line can help in the expansion of the present product mix. Such new lines may be related or unrelated to the present products.
Example: Gillette encompasses a number of product lines, including blades and razors, toiletries, writing instruments, and lighters. Individual products exist within each of the product lines. In other words, Gillette’s line of blades and razors extends to Lady Gillette, Mach 3, Sensor, and others.
The company’s toiletries line includes Gillette Foamy, Dry Idea, and Right Guard, while its writing instruments line consists of Paper Mate and Flair. This gives Gillette a wide product mix.
Contracting or Dropping the Product
This is more difficult because much money has already been invested; therefore, as long as possible, products are allowed to linger on until they become a loss. When a decision on contraction is taken, various alternatives are available to marketers.
The product may be consolidated with several others in the line so that fewer styles, sizes, or added benefits are offered. Alternatively, the marketing manager can simplify the position within a line. Even after this pruning if the product fails, then the company may stop it altogether.
Example: Barbeque Company has three product lines: gas barbecues, charcoal barbecues, and barbecue accessories. Charcoal barbecue sales have declined in recent years, leading management to question whether this product line is worth keeping. Barbeque Company would like to consider two alternatives.
Alternative 1 is to retain all three product lines, and Alternative 2 is to eliminate the charcoal barbecues product line. In the case of Barbeque Company, the company decided to lease the space currently being used by the charcoal barbecues product line for $25,000 per year as the opportunity cost (benefit foregone) of keeping the charcoal barbecues is $25,000.
Alteration of Existing Products
Sometimes experience may show that improving an existing product may be more profitable and less risky than developing and launching a new product. Alterations may be made either in the design, size, color, texture, or flavor of the packaging.
In the use of raw materials, or in the advertising appeal, or the brand manager may bring a change in quality level. This strategy is to be followed regardless of the width and depth of the product mix.
Example: When Coca-Cola co. modified the formula for its leading product and changed its name to the new coke, sales suffered so much that the old formula was brought back 3 months later under the Coca-Cola classic name.
Development of New Uses for Existing Products
The company may find new uses for the existing products. When people find new uses for an existing product, for example, a detergent is used for cleaning clothes, floors, utensils, and even glass products.
Example: A company makes mint mouthwash, and creates varieties with fruit flavors that taste great with mints, like grapefruit or raspberry. Marketing this product as improved mouthwashes from the angle that consumers can now enjoy your high-quality, effective mouthwashes in tasty and refreshing flavors that will help the customer maintain fresh breath.
Trading Up and Trading Down
It involves an expansion of the product lines as well as promotional strategies. It explains situations when the product manager would like to stretch the brand upward or downward as the value proposition. A lower value proposition leads to trading down and a higher proposition is to the trading up model.
- Trading Up refers to the adding of a higher-priced, prestige product to the existing lines with the intention of increasing sales of the existing low-priced product. Under trading up, the seller continues to depend upon the older, low-priced product for the major portion of the sales.
Ultimately he may shift the promotional emphasis to the new product so that a larger share of sales may go to the new product.
- Trading Down refers to the adding of low-priced items to its line of prestige products, with the expectation that the people who cannot buy the original product may buy these new ones because they carry some of the statuses of the higher priced goods.
Example: LG Electronics, which attempted to broaden its market for color televisions by introducing, a frilled version of television called “Sampoorna” for rural markets in India. Many color television manufacturers launch products at lower price versions to cater to the lower end of the market.
Wills cigarette also traded down by bringing out the lower-priced Wills-Flake cigarette pack in the Indian market.
However frequent trade up and down is often found to be harmful because the consumer may be confused about the new product, and the sales in the new line may also get adversely affected as such trading down or up is done at the expense of the older product.
This situation may be avoided by using differentiating brands, channels of distribution, promotional programs, or product design.