Product Mix Strategy
A product mix definition is the list of products and/or services a business offers for sale. For a company selling dog collars, a product mix example could be all the different styles and designs of collars. Development of successful product mix strategies depends on analyzing existing products for market growth and market share. The best product mix for a company is one that directs resource dollars towards products with the highest potential to increase profits and revenue for the company.
Many theories and strategies of marketing have been developed through the years. One of them is the "4Ps of Marketing" which are:
Product/Service: Understand what the product, product line or service(s) are, their benefits and who uses them. What problem does the product solve?
Price: Determining the right price point can be tricky. Too much higher than competitive products and you'll price some people out who can't or won't spend that much. Too low and buyers may perceive your product to be less valuable than competitors, and robs you of profits you could be making.
Place: Where should you place your product so it will be easily found by your potential buyers? Do they shop online or in stores? Big box stores or specialty boutiques? If you don't know the answers, find out where your competitors place their products. That's probably where to want to start.
Promotion: After deciding on the other Ps, you need to promote your product/service where you target audience will see it. Where do your potential customers go for their news and leisure? That's where your promotional messages will be most effective.
The theory is that all of the Ps must be considered and the right choices made for each to successfully bring a product to market. In terms of the product, the key is to think about which products have the most potential for profit and growth and invest in those. The Boston Consulting Group created a simple matrix for assessing the viability of your various products. Known as the BCG matrix, it breaks products into four categories: stars, cash cows, question marks and dogs.
Star products have high growth combined with high-market share, and this combination of attributes can lead to high profit levels and increased cash flow. You should therefore place a high priority on your product stars, using careful marketing to push them towards market domination. For example, if your company sells metal-studded dog collars that are increasing in popularity and already enjoy high-market share, advertise your collars heavily and look for additional distribution channels to increase product availability.
Stable products with high-market share but low growth are considered cash cows. A cash cow position is the ultimate goal of all products as these products are maintaining profit with little marketing or resource allocation beyond basic product support functions. So, you can place resources on other types of products that have growth opportunities.
For example, your company sells the most popular rhinestone dog collars on the market with 80 percent market share. Marketing efforts fail to increase sales because the market is stable, and you have already established your dominance. Your company should minimize marketing spending on rhinestone dog collars and put your emphasis on your star product, the metal-studded dog collar.
High-growth products with low-market share are deemed problem children or question marks. These products have potential to become stars or cash cows, but it can be hard to reach that position. It's a good idea to put time and attention into these products to see if additional advertising, changes in marketing strategy such as targeting a more receptive demographic or rebranding efforts increase sales.
For example, your company sells animal print dog collars. Recent fashion trends have increased the overall market for these collars, but your overall market share is low. Consider advertising your collars in fashion magazines to tie in with the current human fashion trend or in dog owner magazines. If sales increase based on this effort, continue expanding your marketing efforts. If sales stay the same, reconsider the product’s classification.
Products that have low growth and low market share are called dogs. These products should be removed from your product mix once it is no longer profitable to produce the product. No marketing, advertising or undue resource dollars should be used for these products. Maintain the products as long as there are loyalty buyers.
For example, if your polka-dot dog collars have a few loyal dog clubs that use your product for dog shows, but the overall market share and growth for these collars is low, continue to sell until the dog clubs change collars in favor of a new style.