Selling a variety of products or services helps you increase your sales and profit potential and reduces your dependence on one product, which can lead to business closure if demand for that product ends or wanes enough. Analyzing the best mix of products or services you can offer includes reviewing the effects that economies of scale, brand management and administrative workload will play in your ultimate choices.

Product Mix

Your product mix refers to the number and type of products or services you offer. For example, a restaurant might add healthy dishes and children’s meals to its main menu, or it might add delivery and catering services. An athletic apparel company might create a horizontal product mix, selling shorts and tops for tennis, golf, soccer, volleyball or running, or create a vertical product mix, selling tennis tops, shorts, warmup suits, socks, visors and sweaters.

Provides Diversification Opportunities

The concept of creating a product mix is important to companies that don’t want to rely on one product only. Companies diversify for several reasons and in several ways. Some add variations of their products to maximize sales. For example, a car wash might offer a quick drive-through wash for people looking to spend only a few dollars, a hand wash and wax for people wanting more cleaning and protection, and interior detailing service for those who want a total inside-and-out cleaning. Diversifying includes expanding a product mix beyond modifications or complementary products and services. A graphic designer might specialize in designing print publications, website pages and product packaging. A landscaping company might offer house painting and snow-removal services.

Manages Economies of Scale

Adding certain products or services might be too costly to justify their addition. For example, a food truck that sells only six different sandwiches can buy food items in bulk for those six sandwiches. Offering 15 or more sandwiches results in smaller purchases of each food item, raising its food costs. Adding bird supplies to the product mix of a local pet store that specializes in dogs and cats might require inventory volumes, extra shelf space, promotions and adding a knowledgeable staff person. The demand for bird supplies might not be great enough to cover these costs and turn a profit that exceeds what you would have made selling fewer items.

Allows for Upselling and Loss Leaders

When customers are in your store ready to spend money, you can often upsell them impulse items, increasing your sales and revenues with little extra effort. Women who come into a dress shop might be likely to buy accessories such as scarves and belts while they are in a store, rather than going to another store or shopping online for them. If a landscaper’s core business is lawn mowing, he might ask the homeowner if she wants hedge trimming or shrub treatments while he’s there. Selling items at or below your cost to get customers through your door can increase their purchases of other items and prevent them from needing to visit your competition.