Chapter 11

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University of Toronto Scarborough
Management (MGM)
Ingrid L.Stefanovic

INTRODUCTION Product mix is the assortment of product lines and individual offerings available from a company o Product line is a series of related products o Individual offering is a single product within a product line THE EXISTING PRODUCT MIX Starting point of product-planning is to assess the firms current product mix Cannibalization Cannibalizing is the situation involving one product taking sales from another offering in a product line o Firm wants to avoid a costly new-product introduction that will adversely affect sales of one of its existing products Line Extension Line extension is the development of individual offerings that appeal to different market segments but are closely related to the existing product line o If cannibalizing is minimized, line extension provides a relatively cheap way of increasing sales revenues at minimal risk THE IMPORTANT OF PRODUCT LINES Most companies offer their customers product lines Several factors account for the inclination of firms to develop complete product lines rather than relying on just one product Desire to Grow A company places definite limitations on its growth potential when it concentrates on a single product Firms often introduce new products to offset seasonal variations in the sales of their current products Making Optimal Use of Company Resources By spreading the costs of operations over a series of products, a company may find it possible to reduce the average costs of all products Production facilities can be used economically in producing related products The expertise of all the firms personnel can be applied more widely to a line of products than to a single one Increasing Company Importance in the Market Consumers and marketing intermediaries often expect a firm that manufactures and markets small appliances to also offer related products under its brand name The company with a line of products is often more important to both the consumer and the retailer than is the company with only one product Exploiting the Product Life Cycle
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