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How to improve
A product mix is the set of all products that a company offers for sale. Managers need to
provide products that meet the needs of the target markets and at the same time help achieve
the company's objectives in terms of market share and profitability. The product mix needs to
be improved and adjusted over time, because customers’ tastes change and competitors’ new
products alter the competitive landscape. A small-business manager can increase profitability
by improving the product mix.
Product Modification
The width of a product mix refers to the number of different product lines a company carries.
A product line is a group of products that are closely related because they target the same
market or have a similar function. For example, a company that offers detergents, toothpaste
and bar soaps has a narrower product width than one that offers detergents, toothpaste, bar
soaps and personal hygiene products.
Product mix depth is the number of variants of a specific product that the company offers. For
example, if a company offers three types of detergents in two sizes, the company has a product
mix depth of six. It can alter its mix depth by adding more types of detergents or more sizes.
Product mix consistency refers to the functional closeness of the company's products. For
example, a company whose products are all food categories has a more consistent product mix
than one that offers food categories and kitchen utensils.
Increasing product mix width or depth or decreasing consistency may not necessarily be a step
toward improvement. Product mix decisions should be based on company resources and
market needs. For example, managers may discover that certain categories of their product mix
do not sell well and overstretch company resources. In this situation, reducing product mix
width or depth and increasing consistency may be a better move. This way, the company can
serve the target market better and increase profitability.
BCG Matrix
The Boston Consulting Group matrix is an aid in product mix decision-making. It organizes
the product mix in a matrix based on the market share and market growth rate of products. A
product with high market share and high market growth rate is called a star product. Managers
should invest in stars. A cash cow is a product with low market growth rate but high market
share. Cash cows need less investment to maintain market share, and their proceeds are used to
invest in promising products. Question marks are products with high market growth rate but
low market share. Managers need to consider which one has the potential to turn into a star and
invest in those. They should discontinue those with no promise. Dogs are products with low
market share and low growth and are candidates for discontinuation.