Marketing Management, Millenium Edition - epiheirimatikotita.gr

186 CHAPTER 10 MANAGING PRODUCT LINES AND BRANDSwheat) or natural products (e.g., lumber). Farm products are sold throughintermediaries; natural products are generally sold through long-term supplycontracts, for which price and delivery reliability are key purchase factors.Manufactured materials and parts fall into two categories: component materials (iron)and component parts (small motors); again, price and supplier reliability areimportant considerations. Capital items are long-lasting goods that facilitatedeveloping or managing the finished product. They include two groups:installations (such as factories) and equipment (such as trucks and computers),both sold through personal selling. Supplies and business services are short-lastinggoods and services that facilitate developing or managing the finished product.Product MixA product mix (also called product assortment) is the set of all products and items thata particular marketer offers for sale. At Kodak, the product mix consists of two strongproduct lines: information products and image products. At NEC (Japan), the productmix consists of communication products and computer products.The product mix of an individual company can be described in terms of width,length, depth, and consistency. The width refers to how many different product linesthe company carries. The length refers to the total number of items in the mix. Thedepth of a product mix refers to how many variants of each product are offered. Theconsistency of the product mix refers to how closely related the various product linesare in end use, production requirements, distribution channels, or some other way.These four product-mix dimensions permit the company to expand its businessby (1) adding new product lines, thus widening its product mix; (2) lengthening eachproduct line; (3) deepening the product mix by adding more variants; and (4) pursuingmore product-line consistency.PRODUCT-LINE DECISIONSEspecially in large companies such as Kodak and NEC, the product mix consists of avariety of product lines. In offering a product line, the company normally develops abasic platform and modules that can then be expanded to meet different customerrequirements. As one example, many home builders show a model home to whichadditional features can be added, enabling the builders to offer variety while loweringtheir production costs. Regardless of the type of products being offered, successfulmarketers do not make product-line decisions without rigorous analysis.Product-Line AnalysisTo support decisions about which items to build, maintain, harvest, or divest, productlinemanagers need to analyze the sales and profits as well as the market profile ofeach item:➤➤Sales and profits. The manager must calculate the percentage contribution of each itemto total sales and profits. A high concentration of sales in a few items means linevulnerability. On the other hand, the firm may consider eliminating items that delivera low percentage of sales and profits—unless these exhibit strong growth potential.Market profile. The manager must review how the line is positioned againstcompetitors’ lines. A useful tool here is a product map showing which competitiveproducts compete against the company’s products on specific features or benefits.This helps management identify different market segments and determine how wellthe firm is positioned to serve the needs of each.