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Chapter 10Product-Mix Strategies : 

Chapter 10Product-Mix Strategies Copyright © 2001 by McGraw-Hill Ryerson Limited Sommers ? Barnes Ninth Canadian Edition Presentation by Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS

Chapter Goals : 

10 - 2 Chapter Goals To gain an understanding of: The difference between product mix and product line Major product-mix strategies: Positioning, expansion, alteration, contraction, trading up and trading down Managing a product throughout the Product Life Cycle Planned obsolescence Style and fashion The fashion-adoption process

Product Mix and Product Line : 

10 - 3 Product Mix and Product Line The product mix is the set of all products offered for sale by a company. A product mix has two dimensions: Breadth - the number of product lines carried. Depth - the variety of sizes, colours, and models offered within each product line. A product line is a broad group of products, intended for similar uses and having similar characteristics.

Slide 4: 

10 - 4 BREADTH (DIFFERENT LINES) Lawn mowers Gardening tools Lawn furniture Power rotary Power reel Hand-powered DEPTH (ASSORTMENT WITHIN A LINE) Rakes Hoes Shovels Chairs Chaise lounges Benches Each in various sizes and prices Each in various sizes and prices Various sizes and prices in redwood or aluminium with plastic webbing Product Mix - An Example

Slide 5: 

10 - 5 Product Mix Strategies Positioning the Product In Relation to a Competitor In Relation to a Product Class or Attribute In Relation to a Target Market By Price and Quality Product-Mix Expansion Line Extension Mix Extension

Expanding the Product Mix : 

10 - 6 Expanding the Product Mix Mix-extension strategies include: Same brand, related product (Tim Horton coffeemaker) Same brand, unrelated product (Swiss Army watch) Different brand, unrelated product (Pepsi & KFC) Different brand, related product (P&G adds Luvs diapers; already makes Pampers)

Trading Up and Trading Down : 

10 - 7 Trading Up and Trading Down Trading up: Adding a higher-priced product to a line to attract a higher-income market and improve the sales of existing lower-priced products. Trading down: Adding a lower-priced item to a line of prestige products to encourage purchases from people who cannot afford the higher-priced product, but want the status.

Other Product Mix Strategies : 

10 - 8 Other Product Mix Strategies Alteration of Existing Products: Improve an established product with new design, new package, new uses. Product-Mix Contraction: Eliminate an entire line or reduce assortment within it. Pruning to reduce similar brands. Dump unprofitable or indistinct brands.

The Product Life Cycle : 

10 - 9 The Product Life Cycle the concept of the product life cycle applies to product categories, not to brands; it is related to the concept of diffusion of innovation different products will have differently-shaped life cycle curves; will diffuse at different rates a product is normally perceived to pass through four stages over its life cycle; introduction, growth, maturity, and decline each stage requires different marketing strategies

Product Life Cycle Stages : 

10 - 10 Product Life Cycle Stages Introduction—most risky and expensive. Growth—both sales and profits rise, often rapidly. Maturity—sales increase at a decreasing rate and profits decline. Decline—demand drops, often because of another product development.

Slide 11: 

10 - 11 Dollars Time in years Loss 0 Profit Sales Volume INTRODUCTION GROWTH MATURITY DECLINE Product Life Cycle Curve

Strategic Implications of the Stages : 

10 - 12 Strategic Implications of the Stages introductory stage: developing the market, creating awareness, reaching the innovators growth stage: competition begins, sales grow quickly, profits peak, market penetration maturity stage: competition is intense, sales slow down, differentiated product offerings, customers are brand loyal, few new entrants decline stage: customers move to other options, competitors leave, profits are low, consider exit

Characteristics of Life Cycles : 

10 - 13 Characteristics of Life Cycles length of the life cycle will vary across markets; some are quite short and may be getting shorter some fads have very short life cycles, while other products stay at maturity for years in high-tech markets, life cycles are very short some products do not make it through all four stages; they may fail in introduction the life cycle must be considered in relation to a specific market; stage may vary across markets

Managing the Life Cycle : 

10 - 14 Managing the Life Cycle Successful life-cycle management requires predicting the shape of the curve and then successfully adapting strategies at each stage. when to consider entering the market how to manage to capitalize on growth it is possible to develop strategies that will extend the maturity stage; modify the product, devise new uses, or design new appeals greatest challenge comes at the decline stage which may result in product abandonment

Slide 15: 

10 - 15 Part a - Extended introduction stage Part b - Fad Part c - Indefinite maturity stage Time in years Time in years Time in years Aggregate sales Aggregate sales Different Life Cycles

Planned Obsolescence Fashion and Style : 

10 - 16 Planned Obsolescence Fashion and Style Planned Obsolescence: Technological or functional obsolescence; other things do it better now. Style obsolescence: Still serviceable, but looks out of date now. Style: A distinctive manner of construction or presentation in any art, product or endeavour. Fashion: Any style that is accepted and purchased by successive groups of people over a long period of time.

Fashion-Adoption Process : 

10 - 17 Fashion-Adoption Process Series of buying waves as a given style is popularly accepted by one group after another. Three theories of fashion adoption: Trickle-down—a given fashion flows down through several socioeconomic levels. Trickle-across—the fashion moves horizontally and simultaneously within several socioeconomic levels. Trickle-up—a style first becomes popular at lower levels and then flows upward.

Slide 18: 

10 - 18 TRICKLE- UP Product adopted first by lower socio- economic group TRICKLE- DOWN Product offered first to upper socio- economic group Product introduced at same time in all three types of stores: TRICKLE-ACROSS Exclusive high-priced specialty stores (boutiques) TRICKLE-ACROSS Medium-priced department stores and specialty stores TRICKLE-ACROSS Discount stores Fashion Adoption Theories in Action