PRODUCT PRODUCT LINE

NEW PRODUCT DEVELOPMENT

DIMENSIONS OF THE PRODUCT MIX

The product mix consists of all the products that it offers. Within the mix we can identify:

• Product lines (a series of related products)

• Individuals products (each product that contributes to the line mix)

A product line is the term used to describe a related group of products that a business
produces. E.g. A business may produce televisions and its product line may include portable
televisions, 12-inch screen models 18-inch screen models, televisions with a built-in video
facility. Therefore, a product line is a group of products that are closely related because they
function in a similar manner, are sold to the same customer groups, are marketed through the
same types of outlets, or fall within given price ranges. For example, Nike produces several
lines of athletic shoes and Apple produces several lines of technological products. The major
product line decision involves product line length—the number of items in the product line.
The line is too short if the manager can increase profits by adding items; the line is too long if
the manager can increase profits by dropping items. The firm’s objectives and resources
influence product line length.

Product mix is the term used to describe the different collection of product lines that a
business produces. E.g. The same business may also produce video recorders, camcorders
and computers, as well as televisions.

Most businesses will wish to change their product portfolio over time. This can be the result
of changing consumer tastes, replacing those products which have entered the 'decline' phase
of the product life-cycle or to try to break into new markets or new segments within an
existing product.

Width and Depth of Product Mixes

Product mixes are measured in terms of width (the number of products in the mix) and depth
(the varieties of each product – colours, sizes or models offered).

Product Mix Strategy

A company can have a concentrated product mix strategy, focusing on narrow width
and depth or a broad strategy with a wide and deep approach.

Market research is needed; if most people want similar products, a focused strategy would be
suitable but if the market is fragmented, a wider and deeper strategy might be more
appropriate.

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The strategy chosen will also depend on the business’ marketing resources: a company with
limited resources may have to focus its strategy, while a larger a larger organization can
differentiate its products more and adopt a broader approach.

Product mix strategy is particularly important in deciding whether to introduce new products
or reduce the number of existing products. An organization may decide to expand tits mix by
increasing the depth of a line or increasing the number of lines. Gaps in the mix can be filled
with new products or modified versions of existing ones. A company will wish to avoid
introducing a new product that adversely affects sales of one of its existing products; this
would cannibalise the line, with one product eating into the sale of another.

A product mix decision forms a key part of the overall marketing plan, affecting the
combination of the company’s product lines. Senior marketing managers have the
responsibility for marketing decisions about the mix, which include:

• Which product lines to concentrate on

• Which new lines to add and which existing or old lines to cut
• How much emphasis to place on existing lines and products and how much on new
• How much emphasis to place on internal development of new lines and how much on
acquiring new lines and products from other companies.

Line Extensions – Developing new products that appeal to an existing or new market
segment is referred to as a ‘Line extension’. New products are added to an existing brand
line, so for a particular brand of soap there might be a change in the fragrance, the shape or
the pack size. Line extensions often involve ‘stretching’ the product line to reach new groups
of customers.

• Upmarket stretch – Modifying the product, price and promotion to appeal to

wealthier consumers.
• Downmarket stretch – Modifying the product, price and promotion to appeal to less
well-off consumers.
• Sideways stretch – Modifying the product, price and promotion to appeal to
additional consumers in the same market segment.

Line extension can reinvigorate an existing brand by appealing to new customers and
helping to stimulate interest among existing customers. The extensions can also eat into
competitors’ sales.

The main disadvantage of line extension is that it can increase marketing costs because
advertising has to be spread over more products. The new line may also cannibalise an
existing line.

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New Product Development
Given the rapid changes in consumer tastes, technology, and competition, companies must
develop a steady stream of new products and services. A firm can obtain new products in two
ways. One is through acquisition—by buying a whole company, a patent, or a license to
produce someone else's product. The other is through new-product development in the
company's own research and development department. By new products we mean original
products, product improvements, product modifications, and new brands that the firm develops
through its own research and development efforts. New products continue to fail at a disturbing
rate. One source estimates that new consumer packaged goods (consisting mostly of line
extensions) fail at a rate of 80 percent. Moreover, failure rates for new industrial products may
be as high as 30 percent. Why do so many new products fail? There are several reasons.
Although an idea may be good, the market size may have been overestimated. Perhaps the
actual product was not designed as well as it should have been. Or maybe it was incorrectly
positioned in the market, priced too high, or advertised poorly. A high-level executive might
push a favourite idea despite poor marketing research findings. Sometimes the costs of product
development are higher than expected, and sometimes competitors fight back harder than
expected.

1. Idea Generation – The development of a new product begins with an idea. This
might be generated from the sales force, customers, research and development,
retailers or wholesalers. It might relate to a completely new product or the
modification of an existing one. E.g. A Caribbean Cosmetics Company might identify
the opportunity to develop new sunscreen product from the aloe vera plant, based on
its soothing and healing properties.
2. Initial Screening – The company may begin with a range of product ideas, which are
then reduced so that only one or small number of products remain at the final
commercialization stage. Ideas that have potential need to undergo screening tests:
that is, separated from those that do not meet marketing and corporate objectives.
Organizations may use a checklist for this, which might include factors such as
product uniqueness and compatibility with existing product range.
3. Business Analysis – Product ideas that pass initial screening tests are then exposed to
a rigorous business analysis. As with the initial screening, the aim is to eliminate
options that are unacceptable and to focus on what works. A key consideration will be
to ascertain whether there is a sufficiently large market for the product and whether
the returns form the product will outweigh the costs of development, production and
product support such as advertising activity.
4. Product Development – During this process, selected ideas that have the potential to
generate profit move towards becoming physical products. Many parts of the
organization are involved. Product technologists may explore ways to blend aloe vera
with other ingredients and bring samples to company meetings for discussion. The
marketing team can provide consumer impressions of the product, its look and feel,
scent and smell, pricing and packaging. Tests, revisions and refinements will take
place that should increase the chances of the new product being successful.

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• Testing – Test marketing is the first stage of presenting the product in a real
consumer market. The business may often decide to test market the new product in a
small geographic area, in order to test consumer response, before it launches the
product nationally. If the consumer response is favourable, then the product is likely
to be launched nationally. However, if the consumers indicate that some element of
the marketing mix is ineffective (price, packaging, advertising) then this is likely to be
changed before the national launch of the product. However, some companies leave
out the test marketing stage because it can be expensive and because competitors may
become aware of the product before it is fully launched.
• Commercialization – At the end of the development process, products that have
successfully completed all previous stages proceed to full-scale marketing: the
commercialization stage. This is where the product enters the 'Introductory' stage of
its product life-cycle. This is a very costly operation, since a national launch needs to
be supported by extensive advertising and promotional campaigns.

It is inevitable that many new product ideas will not get to the market place and many
of those that do succeed in being launched will fail within a few months of their
commercialisation. However, the businesses which seem to be most successful in
bringing new products to the market place tend to meet a number of vital criteria:

• They develop 2 to 3 times the number of new products as their competitors;

• They get the product to the market place quickly;
• They compete in many different markets;
• They provide strong after-sales service.

New-product development: The development of original products, product improvements,

product modifications, and new brands through the firm's own R&D efforts.
Idea generation: The systematic search for new-product ideas.
Idea screening: screening new-product ideas in order to spot good ideas and drop poor ones
as soon as possible.
Product concept: A detailed version of the new-product idea stated in meaningful consumer
terms.
Concept testing: Testing new-product concepts with a group of target consumers to find out
if the concepts have strong consumer appeal.
Business analysis: A review of the sales, costs, and profit projections for a new product to
find out whether these factors satisfy the company's objectives.
Product development: A strategy for company growth by offering modified or new products
to current market segments.
Commercialization: Introducing a new product into the market.
Test marketing: The stage of new-product development in which the product and marketing
program are tested in more realistic market settings.