Product Line Decisions, Packaging, and Labeling Strategies
Product Line Decisions
Product Hierarchy
- Family of Needs: Basic need
- Family of Products: Product classes
- Product Category: Family products
- Product Line: Similar products within the same class, serving a similar function
- Product Type: Articles within a product line, differentiated by specific attributes
- Product Variant: A unit distinguished by brand or other characteristics within a product line
Product Systems and Product Mix
A product system is a group of different but related products that work together consistently. A product mix (or product assortment) is the set of all products and items offered by a seller.
A company’s product mix consists of different product lines and has dimensions of width, length, depth, and consistency.
- Width: The number of different product lines.
- Length: The total number of items in the mix. Average length is calculated by dividing the total length by the number of lines.
- Depth: The number of variants offered for each product within a line.
- Consistency: How closely related the product lines are in terms of use, production, distribution, etc.
These dimensions allow businesses to grow by adding new lines, lengthening existing lines, adding variants, or increasing consistency.
Product Line Analysis
Companies often develop a basic product platform with add-on modules to meet diverse customer needs. This modular approach offers variety while reducing production costs.
Product line managers analyze sales and profitability to determine which items to produce, maintain, or discontinue. They also analyze the market profile of each line.
Sales and Profits
Products can be categorized based on sales volume, promotion, and profit margins:
- Commodity: High sales volume, heavily promoted, low margins.
- Current/Routine: Lower sales volume, minimal promotion, slightly higher margins.
- Specialty: Lower sales volume, significant promotion, potential for service-based revenue.
- Convenience: High sales volume, minimal promotion, potentially higher margins.
Market Profile
Product line managers must analyze their line’s position relative to competitors.
Product line analysis informs decisions about product line length and product mix pricing.
Product Line Length
Business objectives determine product line length. Goals may include selling superior products, cross-selling, or mitigating economic fluctuations. Companies seeking market share growth may extend their lines, while those focused on profitability may shorten them.
Product Line Extension
Extending a product line beyond current limits can be done downwards, upwards, or both.
- Downward Extension: Offering lower-priced products to capture growth, block competitors, or address a stagnating mid-market. Branding decisions include using the same brand, a sub-brand, or a new brand.
- Upward Extension: Targeting higher market segments for growth, margins, or full-line positioning. Branding may involve the existing brand or a new one.
- Two-Way Extension: Companies in the mid-market might extend in both directions.
Filling the Product Line
Adding items within the current range can satisfy dealers, utilize excess capacity, or address market gaps. However, it risks cannibalizing existing products and confusing customers. Differentiation is crucial.
Product lines require modernization, either gradually or all at once. Gradual modernization allows for market testing but gives competitors time to react. Regular reviews help identify and eliminate underperforming products.
Packaging, Labeling, and Guarantees
Packaging
Packaging involves designing and producing a product’s container or wrapper. There are three levels: primary, secondary, and transport. Packaging influences consumer purchasing decisions and adds promotional value.
Factors driving the importance of packaging:
- Self-Service: Packaging plays a crucial role in attracting customers.
- Increased Consumer Welfare: Consumers are willing to pay for convenience, aesthetics, and prestige.
- Corporate Image and Brand: Packaging contributes to brand recognition.
- Innovation Opportunities: Innovative packaging benefits consumers and manufacturers.
Packaging objectives:
- Brand identification
- Descriptive and persuasive communication
- Easy transport and product protection
- Home storage
- Consumer assistance
Aesthetic and functional components must align with pricing, advertising, and other marketing elements.
Labeling
Labels identify, grade, describe, and promote products. Legal concerns include avoiding false or misleading information. Traceability is another important function.
Guarantees
Guarantees are formal statements about product performance. They reduce buyer risk and can justify higher prices. They are most effective for lesser-known products or when quality surpasses competitors.