6.2.2 Product Line Strategies¶
Product Line Management involves determining the number and variety of product items to maintain in a company's portfolio. It emphasizes managing the depth, which is a critical factor contributing to the proliferation of product lines. Here's a detailed explanation:
Key Factors Influencing Product Line Depth¶
- Customer Heterogeneity:
- When customer requirements vary significantly, the market divides into micro-segments.
- Example: In the shampoo category:
- Anti-dandruff shampoos
- Anti-hair fall shampoos
- Shampoos for straight hair or black hair
- Shampoos for split ends
-
This segmentation increases product line depth to cater to diverse needs.
-
Manufacturer's Ability to Offer Customization:
-
If the company has the technological and production capability to meet specific segment demands, the depth of the product line can increase.
-
Competition:
- High competition drives companies to innovate and further segment the market.
-
Low competition may result in limited innovation or segmentation.
-
Category Size:
- Companies assess if the market size and willingness to pay justify the effort of expanding the product line.
-
In price-sensitive markets, excessive segmentation may not yield returns.
-
Company Objectives and Resources:
- Decisions depend on whether expanding the product line aligns with the company’s profitability and revenue goals.
- Risk of cannibalization: New products within the same line might eat into the sales of existing products.
Product Line Analysis¶
Purpose¶
To determine the optimal size of the product mix. Companies evaluate: 1. Performance: Analyze sales, profit, and market trends. 2. Competitor Profiling: Compare your offerings with competitors to understand positioning and sales impact. 3. Iterative Assessment: - Add products if they increase market share and profits. - Drop products if they cannibalize sales or reduce profitability.
Key Considerations¶
- An experienced brand manager must evaluate whether:
- Adding new items increases revenue.
- Reducing items improves profitability.
Product Line Strategies¶
1. Optimal Product Line Length¶
- Too Short: If adding items increases profits, the product line needs expansion.
- Too Long: If dropping items increases profits, the product line needs pruning.
2. Line Stretching¶
Expanding the product line beyond its current range, either upward or downward. - Upward Stretching: Target higher-end customers with premium offerings. - Example: A soap brand priced at ₹20 introduces a luxury variant at ₹50. - Example: Titan introducing designer watches at ₹50,000 or more. - Downward Stretching: Target budget-conscious customers. - Example: A luxury perfume brand introducing affordable deodorants for ₹500. - Example: A watch brand offering children's watches at ₹500.
3. Line Filling¶
Adding more items within the existing price range to cover market gaps and compete effectively. - Example: Car manufacturers offering multiple models in the same price range with variations (engine power, automatic/manual transmission, colors). - Objective: Increase profits, meet customer needs, and fend off competitors. - Risk: Cannibalization, where one product eats into the market of another.
4. Line Modernization¶
Revamping existing products in terms of: - Style, design, or technology. - Example: Maruti introducing Nexa for high-end cars. - Example: Hero Splendor with models like Splendor Plus, Splendor Pro, and Splendor Classic.
5. Line Featuring¶
Highlighting specific products as showpieces to attract customers to the entire product line. - Example: Apple advertising its iPhone Pro Max models as aspirational products to drive interest in its other models. - Example: Jewelry brands showcasing heavy designer items in advertisements.
6. Line Pruning¶
Eliminating unprofitable or underperforming items from the product line. - Indicators: Declining sales, negative feedback, and lack of market interest. - Objective: Focus resources on profitable items and reduce inefficiencies.
How can I help you today?