Product Mix - Principles of Marketing | Principles of Marketing - B Com PDF Download

Meaning of Product Mix
The term ‘product mix’ implies all the products offered by a firm for sale. It may consist of one line products or several allied product lines.
Product line refers to an assortment or class of similar or related products and services. They may be similar in technology, customers needs, channel used, market served or in some other respect. An individual product in a line is known as a product item. There are several product items in a product line.

Product mix has three important aspects—width, depth and consistency. Width of the product mix is measured by the number and variety of product lines offered by a firm. It shows the degree of diversification of a firm’s activities. The depth of product mix is determined by the number of items in a product line.

By offering several brands of a product, a firm can cater to widely varying needs and tastes of customers and thereby beat its competitors. For instance, the range of bathing soaps (Lifebouy, Lux, Rexona, Liril, etc.) offered by Hindustan Lever Ltd. shows the depth of its product line while the width of its product mix consists of Dalda Vanaspati, Close-up Toothpaste, Talcum powder, etc. in addition to the soaps.

The consistency of product mix refers to the degree of similarity between product lines in terms of their end-use, production requirements, price ranges, distribution channels, advertising media, etc.
These dimensions of the product mix serve as guides to decisions regarding the additions and deletions of product items and line. By increasing the consistency of product mix, a firm can reduce its costs of operations and acquire unparalleled reputation in the market.

Factors Affecting Product Mix
Product mix is expanded, contracted, or modified depending on following factors:

1. Profitability:
Every business unit tries to maximize its profits. It makes certain changes in its product mix in a way to realize positive impact on profitability. Company prefers to introduce more product lines or product items in existing product lines to improve its profitability. Product mix is constantly adjusted to realize more profits.

2. Objectives and Policy of Company:
Company frames its product mix to achieve its objective. Product mix is prepared, modified, or changed in light of objectives. Therefore, addition, subtraction, or replacement of product lines or product items is based on what a company wants to achieve. Product mix is prepared and modified according to a company’s policy.

3. Production Capacity:
Marketing mix decisions, to a greater extent, depend on plant or production capacity of company. Company will design its product mix in a way that optimum production capacity can be utilized.

4. Demand:
Product mix decisions are taken with reference to demand. Marketer should study consumer behaviour to find the popularity of products. Changes in consumers’ preference, fashion, interest, habits, etc., must be reflected in product mix of company. Company, naturally, priories those products which have more demand. In case of falling demand, company must drop poor products gradually. Thus, product mix is constantly adjusted to meet consumer needs and wants.

5. Production Costs:
Product mix is widened or narrowed depending upon production costs. Company will prefer those products, which can be produced within budgeted limit. Sometimes, for any reason, the manufacturing costs for existing products rise, the company decides to drop such products to reduce their production costs. It tries to balance selling price, profit margin, and production costs.

6. Government Rules and Restriction:
Every company produces such products, which are not restricted or banned by the governments. Even, sometimes, company has to stop certain products or varieties when it is declared as illegal. In same way, social and religious protests also play a vital role in this regard. Contemporary legal framework has direct impact on size and composition of product mix.

7. Demand Fluctuation:
Apart from consumer behaviour, demand is also fluctuated due to many reasons. Especially, demand is affected due to seasonal effect, non-availability of substitutes, increase in population, war, draught, flood, or any other reason. In order to meet with the changed demand of certain products, the company has to adjust its product mix.

8. Competition:
It is one of the powerful factors affecting product mix. A company formulates its product mix in such a way that competitors can be strongly responded. Product mix strategy adopted by the close competitors has direct impact on company’s product mix.

9. Impact of Other Elements of Marketing Mix:
Over and above these factors, other elements of marketing mix such as price, promotion, and distribution are also equally important in designing product mix. Company tries to maintain consistency among these all elements to carry out marketing activities effectively and efficiently.

10. Overall Business Condition or Condition of Economy:
Domestic as well as global economic conditions are also important considerations. Because of liberalization and globalization, no business can dare underestimate macro picture of the world economy. A company should keep in mind health of domestic economy with reference to the world economy. This is more relevant when a company is involved in international trade.