Building Product Portfolios

Building Product
Portfolios
Cleo Tagud
Going beyond One Product
“Sooner or later you have got to expand

your product mix.”
Definitions:
Why should firms expand their
Economies of scale –
Reduction in costs of offerings?
goods when production
is ramped up
Economies of scope
–
– Mostly, it will be about economics of scope
Reduction in overhead
costs that is possible
EXAMPLE:
when the enterprise Magazine publishers typically cannot survive with just one magazine title
produces more than
one good. alone because the lone title will have to support the high cost of maintaining a
sales force and distribution arrangements. Typically, a magazine publisher will have
to have at least four or five titles so that the overhead costs could be apportioned
among these. Sales people will now be able to carry multiple titles when dealing
with distribution points, rather than furnishing just one title.
The Product Mix
– The product mix is the set of all products that a business

offers for sale and is categorized along the following:
 Length – the length of the product line.
 Width – the number of different product lines carried.
 Depth – the number of variants per product in a line.
Product Mix
Dimensions
Figure 1
Length -
Pertains to the number of products offered in a product line
Cannibalization
– One product
stealing market  Have each product target a distinct market with minimal overlap so that the total
share from the
market penetration of the entire line grows with every new product introduces
other.
 Having two products in one target market may cause cannibalization
 RULE EXCEPTION ; FIRMS WOULD LAUNCH PRODUCT VARIANTS THAT THREATENS
TO CANNIBALIZE THEIR OWN PRODUCTS FOR THEM TO GET MORE SHELF SPACE
Note:
IN A STORE TO SQUEEZE OUT COMPETING BRANDS
The phrase
“Product Line” Example: Coca-Cola offers three variants of Coke, namely Coca-Cola, Coca-Cola
is defined may Light and Coca-Cola Zero. There is arguably a high risk of cannibalization between
vary depending
Coke Light and Coke Zero since they offer the same health-conscious market.
on the scope of
products However, the difference between the two is that Coke Light tends to appeal more to
offered by any women and Coke Zero has a masculine appeal. This will not matter as Coca-Cola
firm. benefits from the greater shelf coverage.
Width
- refers to the number of product lines that a marketing entity may
have.
– Expand the product line’s width by introducing a new product category

– An expansion through width offers a different opportunity. It is a chance to sell
other products to the same target markets that have already been targeted by
existing products.
– If a large market segment patronizes your soap, you can still get the same
segment by offering a new product category to spend on.
Example: EZ Tool Company have two product lines – hammers and wrenches –
your product mix width is two.
Depth –
pertains to variety, which is typically manifested as flavours,
colors, sizes, or formulations for a particular product
– Example: An ice cream coming in different flavours such as vanilla and

chocolate, with each new flavour expanding the depth of the product even
further.
– The offering of product variety produces another potential advantage:
consumers can perceive the brand to have greater “category expertise,”
especially if the variants are remarkably compelling rather than near-similar.
(Jonah Berger, 2007)
– Consumers when faced with so much variety actually become demotivated to
make a specific selection (e.g. in restaurants). Other studies, meanwhile, seems
to indicate that offering too much variety can lead to post-purchase
dissatisfaction as consumers regret their particular choice. (Lepper, 2000)
Product Mix
Figure 2
Line Imaging and Line Featuring
LINE IMAGING –
 Having a flagship product among the products in line
 Promotions can focus on this product and the brand recognition may be imbues
onto the other product in the line as well
LINE FEATURING –
 Aggressively promoting a product that offers great value
 Hopes to communicate that the entire line, as a whole, is composed of good
value products
How to Determine an Optimal Product Mix. By: Aaron Marquis
http://goo.gl/glHe2q
1. Analyze production processes and eliminate any activities that do not add value to
the company or are not necessary for product support.
2. Calculate the costs associated with the products after you eliminate inefficiencies
3. Investigate the possible constraints faced by the product line.
4. Calculate the gross revenue generated from the product by multiplying the
number of units sold by the price per unit. Then, calculate the total percentage of
sales that the product contributes to your overall bottom line.
5. Study the costs and benefits of each product to determine an optimal product mix
Mini Case: Promil Pre-School and Its
Big New Sister Brand
The bottom line: two powerful brands under the same roof, competing for the
same target market is not a good problem to have. The first order of business is to
clearly define which markets belongs to which brand.

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Building Product

“Sooner or later you have got to expand

– The product mix is the set of all products that a business

– Expand the product line’s width by introducing a new product category

– Example: An ice cream coming in different flavours such as vanilla and

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