Product-mix is the composite of products offered for sale by a firm or business unit. It is the collection of products manufactured or distributed by a given company. Changes are frequently made by the manufacturers in the product- mix for purpose of diversification. They may involve the intensive use of the firm’s present plant in facilities including the marketing network, or they may require the acquisition of additional facilities. Having broad product-mix also spreads the risk of failure over a great number product lines.
This is an application of the dictum “do not put all your eggs in one basket”. Like-wise, the firm should not depend on one or two products only. The width, depth and consistency of the product- mix are the three important dimensions of product-mix.
Factors Influencing Change in Product Mix
No exact number of products to be manufactured and marketed by a firm can be determined. This number depends upon the product line strategy, cost of production, demand factor, and the objectives of the marketing department and so on. The following are certain important variables which influence the product mix of a firm :
1. Cost of Production— A firm may think of adding the new product to its product line which can be produced easily with the same machinery and production facilities. It will certainly bring down the cost of production of existing products. Thus, the cost considerations may be tempting motives behind such diversification.
2. Demand Factor— A firm can add to its product line a product which has a derived or complementary demand to its products. For example, a pen manufacturing company can start the production of nibs and ink also. It will change its product-mix and expand the, product line.
3. Advertising and distribution Factors— A firm using a wide network of advertising and distribution channels can think of adding products to its product line as they can be distributed with the help of the same network. It will lower down their advertising and distribution costs also.
4. Use of Waste— Sometimes use of waste and residual material also can increase product line. The product can be manufactured as bye-product and it may bring down the cost of main product.
5. Company Objectives— To stabilize or increase the profits, to maximize sales or to enter into new markets may be other company objectives which may motivate the company to add new products to its product line. The elimination of obsolete products, to dropping of unsuccessful product from the product line, simplification and specialization also bring about changes in product line and product-mix of the companies.
USA based research company Frost & Sullivan’s analysts follow a 10-step process to evaluate product line strategy and assess their fit with best practice criteria and Award candidates .