PRODUCT

MANAGEMENT
MODULE 3
WEEK 5&6
PRODUCT MIX AND PRODUCT LINE

W E E K 5
PRODUCT MIX AND PRODUCT LINE
A firm’s product mix includes all product items it offers. Procter & Gamble’s product mix includes toothpaste, soap,
detergent, deodorant, and cake mixes.
A product line is group of products that are related because of customer, marketing, and /or production
considerations. Crisco, Crisco Oil, and Duncan Hines are part of Procter & Gamble’s food line and Cheer, Dash, Duz,
and Gain are part of its detergent line.
Table 9 - 3 lists several reasons many firms choose not to limit themselves to one product. A typical large
multiproduct firm’s product mix includes new, growing, maturing, and declining products. One author divides a firm’s
products into six categories: (1) Tomorrow’s breadwinners, (2) Today’s breadwinner, (3) products capable of becoming net
contributors if something drastic is done, (4) yesterday’s breadwinners, (5) also-rans, and (6) failures.

BREADTH AND DEPTH

A product mix has the structural dimensions of breadth ( or width) and depth.Breadth refers to the number of different product
lines. Depth refers to the number of product items within each line ( See Figure 9-6 on the following pages )
A firm can expand its product mix by increasing the number of product lines or the depth within one or more
lines. Procter & Gamble expanded in breadth when it entered the beverage business by buying the non-Canadian
business of Crush International Ltd. P & G expanded in depth ( rounded out its beverage line ) when it subsequently
bought Tender Leaf Teas from Nabisco Brands Inc., and Ben Hill Griffin Inc. , a fruit juice processor.
A firm can contract its product mix ( product mix simplification) by reducing the number of product lines or
the depth within one or more lines ( product line simplification). RCA reduced breadth when it dropped computers.
SCM Corporation reduced the depth of its electric typewriter line when it dropped large-size typewriters.
TABLE 9-3. REASONS MANY FIRMS DO NOT WANT TO LIMIT THEMSELVES TO ONE PRODUCT.

1. to counteract the effects of the product life cycle on a one-product firm

2. to even out seasonal sales patterns.

3. to use company resources and capabilities more effectively.

4. to capitalize on middlemen and consumer acceptance of established products.

5. to spread production and marketing costs over a wider product mix.

6. to become better known and respected by middlemen and consumers.

DROP-ADD DECISIONS
A firm’s product-market matching strategy depends mainly on its philosophy of growth. As we saw in Chapter 3, it can
seek growth by (1) increasing market share of existing products in current markets, (2) penetrating new markets with existing
products, (3) developing new products to sell in current markets, or (4) developing new products to sell in new markets. External
and internal factors affect a firm’s decision to add or drop products from its product mix.
EXTERNAL FACTORS Demographic change, such as a recent upturn in the birthrate, probably played a part in Hasbro’s
decision to buy Glenco Infant Items Inc., a manufacturer of bibs and other infant accessories. Rising discretionary incomes,
growth in the single market, and greater participation in the labor force by women probably played a part in the
decisions of Campbell Soup Company( Swanson), Nestle (Stouffer), Pillsbury (Green Giant), Greyhound ( Armour
Foods), ConAgra (Banquet Foods), and R.J. Reynolds ( Morton ) to upgrade their TV dinners into
higher-quality entrees.
Changes in the economic and competitive environment also are important . One of the reasons Kodak entered the
instant photography market and also introduced its Ektaprint copier-duplicator was its expectation of greater
competition in the film market. The big success of IBM’s Personal Computer was a factor in the joint effort by Xerox
Corporation, VisiCorp, and 3Com Corporation to develop products to link the computer to other electronic office
devices.
Developments in the legal environment are another factor. Several years after Procter & Gamble acquired the Clorox
Company, the Federal Trade Commission required Procter & Gamble to sell it, fearing that the acquisition would
lessen competition in the household cleaning products industry. Thereafter, Clorox started adding new products. It did
not want to limit its product mix to bleach products, which were in the maturity stage of their life cycles.
 Changes in consumer behavior influenced supermarkets to add nonfood items to satisfy increased customer
preferences for one-stop shopping. Consumer concern about too much sodium in the diet influenced Frito-Lay to
introduce its Grandma’s line of home-style cookies. The slowdown in the jogging boom influenced Nike Inc. to add a
line of sports and leisure clothing and footgear, while kellogg entered the yogurt business because of slower growth in
the market for ready-to-eat cereal.
INTERNAL FACTORS A firm’s mission, resources and capabilities, product characteristics, perceived profit potential, and
perceived risk influence its decisions to add or drop products. Digital equipment Corporation’s technological capabilities
enabled it to become the world’s second-largest computer manufacturer by being the first company to mass produce
minicomputers. Commodore International decided to develop the computer software to accompany the launching of
its Commodore 64 business computer rather than let other firms develop the software. Software generally is a higher-
margin product than hardware and Commodore wanted to realize the profit potential insoftware for itself. Financial
considerations often favor product additions to spread risk , reduce seasonal fluctuations in sales volume, and to
spread the cost of maintaining a product-servicing operation.
Dropping slow-moving products may reduce a firm’s total sales but it may cut total costs even more and lead to
greater overall profit. Poduction factors may favor adding new products to use excess capacity or waste materials. Sun-
Diamond Growers of California markets substandard raisins, stern, and prune pits by distilling them into alcohol,selling
them as cattle feed, or turning them into fuel.
Similarly, production factors may lead to the dropping of a product because of the rapidly rising cost of a key
raw material. Marketing factors may favor adding new products to give the salesforce a fuller line. Marketing factors
may also favor dropping a slow-moving product so that the salesforce can concentrate its efforts on more profitable
products.
CANNIBALIZATION
Cannibalization occurs when increasing sales of a firm’s new product are due mainly to decreasing sales of its
established product or products. Estimates are that as much as one-half the sales of a newly introduced low-tar
version of an established brand of cigarettes comes from that established brand’s sales.
Many insurance companies have begun marketing universal life insurance policies that are more in the nature of
investments that life insurance. According to some industry experts, these companies are selling new products that
are basically achieving sales at the expense of their traditional products. Likewise, people at Sterling Drug , Inc.
debated for a long time the merits of introducing Panadol in the United States before they decided to launch it. They
were afraid that the product would take sales away from its Bayer aspirin.
To avoid cannibalization, the new product should not be identified too closely with established products. Instead,
it should be targeted with new appeals to different market segments. Ralston Purina’s introduction of Moist & Chunky,
for example, did not cannibalize its Purina Dog Chow. In addition to using different promotional appeals, Moist &
Chunky is priced higher that Purina Dog Chow.
Cannibalization is desirable when margins on new products are higher than those on established products. In
highly competitive industries it is often desirable to induce target customers to trade up to the firm’s newer products.
Cannibalization, however, is especially undesirable when a lower-margin product cuts into the sales of higher margin
products.
A product line possesses the following characteristics :
1. A group of products closely related to each other
2. They are intended for same uses or they function in similar manner.
3. They may possess similar physical characteristics.
4. Sold to the same customer group.
5. Marketed through the same types of outlets with given price lines.
Examples : Home furnishings, Men’s Accesories, Appliances.

PRODUCT MIX INCLUDE :

1. The complete list of all products offered for sale or produced by a company.
2. It is a composite of all products, brand or items within each product line.
Examples : Dining Table. China Cabinet, Belts, Shoes, Socks, Washing machines, TV Set.

MAJOR PRODUCT LINE STRATEGIES :

1. Expansion of product mix.

a. Increasing the number of product lines. Example : Hanes for men added a new line, the Hanes for Ladies
This expansion strategy is implemented if there is a manifestation of market demand for new lines or
assortments.
2. Contraction of product mix
a. Eliminating a complete line. Phasing out a “deadwood “ product line.
b. Simplifying assortment within a line. Decreasing number of styles, sizes, colors or other product mix depth or
breadth.
 This strategy is implemented if market demand is very low and cannot even offset maintenance costs.

3. Alteration of existing product. Redesigning of an industrial product or new packaging design for consumer
products.

4. Positioning of the product. This is the consumers’ perception of a product, its image against competitors
products and other products being sold by the same company.Improved product position is achieved simply
by shifting promotional theme or target market like Perla detergent soap, originally was promoted as laundry
detergent, now - it emphasizes its effects on the skin, thereby some consumers even use it as facial
cleanser.

5. Trading up and trading down. Trading up is adding high-priced, well-known brand in order to increase
sales of existing low-priced items. This appeals to consumers’ psychological comparison between a high
priced item equivalent to a better quality product.
Trading down is adding low-priced products in order to increase sales of existing high-priced items.
This appeals to mass market --who may not enter an outlet known to have high priced line, but being aware
of its trading down strategy, may buy from this store.

6. Product differentiation and market segmentation.Market segmentation had been defined earlier. Product
differentiation involves creation of consumer awareness about the differentiating features of a product.
This consumer education about the product can be effectively achieved by using advertising as a tool.
ACTIVITY 3 :

Identify whether each item is a PRODUCT LINE or PRODUCT MIX . Write your answer after each item.

1. Appliances _______________
2. Home Furnishing _______________
3. Notebooks _______________
4. Shoes _______________
5. Infant Formulals _______________
6. Perfumes _______________
7. Ballpens _______________
8. Paints _______________
9. Jewelries _______________
10. China Cabinet _______________
11. Toiletries _______________
12. Cleanser _______________
13. Hardwares _______________
14. Culinary products _______________
15. Cooking oil _______________
PRODUCT OBJECTIVES AND
POSITIONING

W E E K 6
PRODUCT OBJECTIVES AND POSITIONING
A firm’s product objectives result from its effort to match present and future market requirements with its resources
and capabilities. Product objectives are the “whys”of the firm’s marketing effort and reflect its mission. They must be
compatible and integrated with overall company objectives, the objectives of other departments in the firm, the
objectives of other marketing mix elements, and societal expectations.
As we saw in the previous chapter, a product is a bundle of perceived physical, chemical, and /or intangible
attributes that has the potential to satisfy present and potential customer wants.
A product’s position refers to consumers’ perception of its attributes relative to rival brands. Thus it is present
and potential customers, not marketers, who position products in consumers’ minds ( perceptual space). But if a
marketing organization can determine how its product is positioned, relative to rival brands, in consumers’ minds, it
can adopt various positioning strategies in an effort to manage the product’s position. This requires a careful analysis
of competitive offerings and the market segments the marketer wnats to penetrate. Thus product positioning is effort
aimed at creating and maintaining in the minds of target customers the intended image for the product relative to
other brands so they will perceive the product as possessing the attributes they want.
In positioning a product the marketer may decide to compete head-on against ( position the product nearby)
one or more existing brands. For example, not long after the Quaker Oats Company introduced Tender Chunks dog
food as the first dry, yet moist, dog food, Ralston Purina introduced Moist & Chunks. Among classic successes in
head-on challenges against market leaders is Avi’s ( “We try harder”) against Hertz. An example of an unsuccessful
head-on challenge involved * Xerox’s attempt to go against IBM in computers. Despite the risk involved in head-on
positioning, it perhaps has become more popular in recent years because of greater use of comparative advertising,
in which one brand of product is compare to one or more named rival brands.
 In some cases, however, a product may be positioned to minimize direct competition with established brands. For
example, a product perception map that shows an ideal-brand position with no brand positioned nearly might
represent an opportunity for developing a new product that offers the desired attributes. Often such products are
introduced with a “positioning with an idea”strategy. For example, Gillette positioned its Silkiene hair conditioner with
the unique proposition that silkiene work only on the most damaged parts of the hair shaft. As we will see later in this
chapter, existing brands are often repositioned. For example Canada Dry Club Soda used to be sold solely as a mixer,
but the growing popularity of wine and lighter spirits and the success of Perrier led Canada Dry to attempt
repositioning CLub Soda as a sparkling water
A company that is launching a new brand in a product category in which it already has two or more established
brands usually will want to position the new brand so that it will not cannibalize its existing brands. To help avoid
cannibalize its existing brands. To help avoid cannibalizing its diet cola Tab, which appeals mainly to women, the Coca-
Cola Company positioned its Diet Coke to appeal to men. According to the firm’s research, there was a considerable
market among males for a low-calorie soft drink. But if the new brand will generate more profits than one or more of its
existing brands, the firm may not care if it cannibalize them.

PRODUCT MEANINGS:
A product has meaning to target customers, the marketer, and society. They view a product as a bundle of satisfactions.
Different people, however, expect different satisfactions. For example, people who have hay fever often take
antihistamines to relieve their sniffles and sneezing. But since such drugs can cause drowsiness nonsedative
antihistamines were introduced for people who did not want to become sleepy. The sedative variety, however, did not
become obsolete because many people take antihistamines to help ensure a restful sleep.
 Marketers should know what their target customers except in terms of functional qualities, such as durability,
performance, and warranty, and what they expect in terms of symbolic meanings, such as prestige and sex appeaal. This
is the only way they can develop customer-oriented market offerings. For years many people believed that washing their
hair in beer was beneficial. Bristol-Myers Company’s Body on Tap is a shampoo that has real beer in it and is advertised
as such to help differentiate it from brands.

PRODUCT LIABILITY
Society’s view of a product sometimes conflicts with the buyer’s and/or the marketer’s view. For example, the required
safety equipment on cars sometimes is criticized by consumers and marketers. Societal considerations, however, are
becoming more important in product decisions, especially in the areas of product safety and packaging.
Product liability suits have become more common and costly. Under the concept of strict liability, manufacturers and
sellers have no legal defense for placing a product on the market that is dangerous to the consumer because of a known
or knowable defect. This standard, however, has been broadened by some courts to the concept of absolute liability.
For example, suppose a pharmaceutical manufacturer places on the market a new product that , at the time, was
believed to be safe. If, year later, a side-effect problem comes to light, the manufacturer is liable even if it did its best
according to the state of the art in its industry at the time of manufacture and had no way of knowing that the product
could cause a problem later on.
Manville Corporation sought bankruptcy-court protection in 1982 because it expected that 52,000 suits eventually
would be filed against the company by individuals claiming health damage from exposure to Manville-made asbestos. As
might be expected, the cost of product liability insurance has skyrocketed, as have court costs. Thus a growing number
of product liabiliy lawsuits are being settled out of court. One of the more recent ( 1984 ) involved the six-year-old
product liability case brought by thousands of Vietnam veterans claiming injuries from agent orange ( a defoliant used
during the Vietnam war) in a class action against seven chemical companies.
 Because product liability laws vary from state to state, the U.S. Department of Commerce in 1978 developed a
Model Uniform Product Liability Act whose adoption by the states is voluntary. It states that a product may be proven
defective in one or more of the following ways : (1) It was unreasonably unsafe in construction, (2) it was unreasonably
unsafe in design, (3) It failed to provide adequate warnings or instructions, or (4) it failed to conform to the seller’s expressed
warranty. By mid-1984, no state had adopted the act in full, and no two product liability laws in thirty-two states were identical.
Eighteen states had no product liability law at all. Proposed federal legislation that would provide uniform standards and override
state product liability laws had been introduced in January 1983. The legislation, however, had not been passed by Congress as of
mid-1984.

PRODUCT DESIGN
The first step in product design is identifying the target market and gathering information about its characteristics and product
expectations. This helps to avoid undersign ( omitting desired features ) and overdesign ( adding features target customers do not
want because they do not add to the product’s appeal or because they add more to the price than buyers are willing to pay ).
The benefits potential buyers want are a major consideration to firms in designing their products. Key Pharmaceuticals’ Nitro-
Dur enables angina pectoris suffers to apply the nitroglycetin-coated small bandage to their bodies each day to prevent attacks,
instead of having to take nitroglycerin tablets after an attack. COMPAQ Computer Corporation’s COMPAQ Portable Computer enables
businesspeople to carry the computer from office to office or take it on business trips or home on the weekend.
Product design must include the benefits that middlemen expect as well. Although final customers come first, middlemen
should not be overlooked. Grocers, for example, do not want packages that take up too much shelf space. L’éggs pantyhose display
racks were accepted by retailers because they do not require much space. When the same manufacturer began test marketing socks
and men’s underwear, many retailers complained that the display racks required too much space to carry all the colors and sizes
customers want.
 People buy products to solve problems and this affects product design. For example, which problem is a
refrigerator maker trying to solve; keeping perishable foods from spoiling between weekly shopping trips, storing
perishable foods for several weeks, or having crushed ice and ice-water readily available for parties and long-term
cold storage capacity? Depending on the answer, the firm would offer a refrigerator with a small freezer, a side-by-side
refrigerator-freezer, or side-by-side refrigerator -freezer with crushed-ice and ice-water dispenser on the door.
Multifunction products usually have a wider markets than single-function products. But if potential buyers think a
product is capable of performing too many functions, they may suspect it does none of them well. A person might
not buy side-by-side refrigerator-freezer out of fear that a breakdown will cause both refrigerated and frozen foods
to spoil. On the other hand, since its introduction in 1983, many people have bought Admiral’s Refrigerator A
LaMode - a refrigerator that can make cold soups, slush drinks, and ice cream.

Product designers are increasingly emphasizing the human side to their product’s design. Called human factors
engineering, or ergonomics, it has become very important in the computer industry, for example, whose goal is to
make computer that complement human capabilities rather than overwhelm them -computers that are easy to
operate and comfortable to use (“user friendly” ) . Ads for Mack Trucks’Mack Ulta-liner truck refer to “ more comfort
for the driver - the two spoke, soft-feel wheel tilts and telescopes”.
PRODUCT FEATURES
A product is a bundle of satisfaction because of its features - quality, styling, performance, and materials . Each affects a
product’s image.
In deciding how much quality to build into a product, customer-oriented firms do not simply build the highest-
quality product possible. Only enough quality should be designed into a product to enable it to perform its expected
functions reliably. More quality than target customer expect may price the product out of their reach. For example,
Peugeots have silver-tipped spark plugs because Peugeot’s target market wants and can afford the highest quality
possible. Buyers of Chevrolet Cavaliers do not expect such high quality for the price.
Styling ( color, shape, size, and so on ) is important for products ranging from tissue paper to office furniture.
Styling should facilitate a product’s function. The midiskirt’s failure in th ealy 1970’s was due in part to the difficulty of
driving in it. One often-given reason for the Studebaker’s problems was that the cars were too advanced in styling.
Customers also expect a certain level of product performance. Automakers in the 1950s and 1960s engaged in a
“horsepower derby” when they realized people wanted high performance cars. More recently, performance for cars
and many other products is measured by what it costs to use them. Winnebago offers lighter recreational vehicles and
more fuel-efficient motors. Outboard Marine Corporation has made design changes for a better blend of fuel economy
and horsepower in its Johnson and Evinrude outboard motors.
The materials that go into making a product can be very important. Materials selection decisions can affect a
product’s sales appeal and should not be made solely by production managers. Materials shortage in some industries
and questions regarding safety and health may lead firms to search for alternatives. Many building products that used
to be made of asbestos, for example, are now made with other materials due to health considerations. Cost
considerations can also be a factor. The high cost of cane and beet sugar was a factor in Coke’s and Pepsi decision to
increase the use of cheaper high-fructose corn sweetener in their sugared colas.
PRODUCT OBSOLESCENCE
Product obsolescence is related to product quality. Functional obsolescence occurs when technological breakthroughs
render an existing product out-of-date. Commercial vacuum tube computers are functionally obsolete. Microprocessors
( computer on a chip) caused the obsolescence of chip-laden circuit boards. Goodyear’s all-season Tiempo and Arriva
tires have made snow tires functionally obsolete in some market segments - along with the need to change tires twice a
year!
There are three types of Planned Obsolescence : ( 1) postponed, (2) intentionally designed, and (3) fashion or style.
Postponed obsolescence means holding back on adding product improvements until present inventories run out or
demand falls off sharply. Intentionally designed obsolescence involves designing a product, or a crucial part, to wear out
within a given period of time. Fashion or style obsolescence is psychological - new model cars make last year’s models
obsolete. Planned obsolescence is the subject of a lot of controversy.
A marketer may try to defend postponed obsolescence by saying a product improvement was withheld to provide
more time to test it and to research potential customer desire for and willingness to pay for it. Or a marketer may claim
that its premature introduction would render some inventory worthless ad these losses would have to be offset by
higher prices on the improved product. Of course, the marketer always runs the risk that a will incorporate the
improvement in its product.
Marketers of disposable cigarette lighter, pen, and razors offer inexpensive products that have a very short life
compared to more expensive and permanent versions. Their acceptance by consumers, however, is evident in their
successful sales results. Other than this type of intentionally designed obsolescence the concept is hard to defend and
society has become increasingly intolerant toward it. It also is risky in that it may cause customers to switch to other
brands.
 Fashion or style obsolescence may result from a marketer’s effort to cater to market segments that demand
“newness “. Obsolescence also helps to make products available for the second-hand market, and it may be a natural
result of the dynamic competitive and technological environment in which marketers operate.

PRODUCT POSITIONING
This is the system of designing the company’s image and value offer so that the market segment can understand
and appreciate what the company stands for in relation to its competitors. Product positioning is also the image that
the product projects in relation to competitive products of to other products marketed by the company in question.
Several positions may be considered by the company. It might go after the “low-price position”, “ high- quality
position”, “high- service position “, or “advance technology position “. In this case the company is establishing a
competitive advantage. Competitive advantage grows out of value a firm is able to create for its buyer that exceeds
the firm’s cost of creating it. Value is what buyers are willing to pay, it may be a cost leadership approach or price
differentiation approach.

TYPES OF INDUSTRY FOR PRODUCT POSITIONING.

1. Volume industry - These are companies which strive for low-cost position or the highly differentiated
prosition. They gain high profit at mass production. Prices are low for big orders.
2. Stalemated industry -These has few potential advantages like a steel industry where it is hard to
differentiate the product or its manufacturing cost.
 3. Fragmented industry - These are made-to-order industries where many opportunities are available
for differentiation.
4. Specialized industry - Companies specializing in production for selected market garments.

POSITIONING ERRORS FOR PRODUCT

1.Underpositioning - Consumers have unclear perceptions or ideas about a company. They may see it as
similar to another firm and are vague of what the company stands for.
2. Overpositioning - They may see a company braodly in terms of product offering or price lines.
3. Confused positioning - Buyers may have different impressions about a company or product. Some may say
Company A has better engineered products and others may say it is poorly engineered.

POSITIONING STRATEGIES

1. Positioning in relation to a competitor.

2. Positioning by product attribute
3. Positioning based on price and quality
4. Positioning in relation to product use.
5. Positioning in relation to a target market.
6. Positioning in relation to a product class.
 ASSIGNMENT 3

I. Identify the four types of Industry for product positioning.

TYPES OF INDUSTRY FOR PRODUCT POSITIONING.
1. Volume industry - These are companies which strive for low-cost position or the highly differentiated prosition. They gain high profit at mass
production. Prices are low for big orders.
2. Stalemated industry -These has few potential advantages like a steel industry where it is hard to differentiate the product or its manufacturing cost.

3. Fragmented industry - These are made-to-order industries where many opportunities are available for differentiation.
4. Specialized industry - Companies specializing in production for selected market garments.

II. Explain each type of industry and give example each.

III. Explain each type of planned obsolescence.

Postponed obsolescence means holding back on adding product improvements until present
inventories run out or demand falls off sharply. Intentionally designed obsolescence involves designing
a product, or a crucial part, to wear out within a given period of time. Fashion or style obsolescence is
psychological - new model cars make last year’s models obsolete. Planned obsolescence is the subject
of a lot of controversy.