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Understanding Product Mix
For this, organizations try to target maximum customers of the segments and therefore they deal with multi- products. This is called product mix.In other words, product mix of an organization is combination of its various products with which they deal in order to maximize its sales and hence profitability. Depending upon the size of the organization and various other marketing factors, either the organization deals with the same line of products to achieve maximum share or it may deal with the range of different products.
Eg: A medium size organization whose main product is washing powder, may prefer to deal with all ranges of washing powder targeting different segment of customers. While bigger and well established organizations may deal with the various ranges of products and diversify its products within core competency. At a given point of time, this entire range of products of the organization is called its product mix. Thus, product mix contains product lines and product items.
Product mix helps the organization in many ways. Like:
* Helps to increase the market share of the company and hence its turnover and profitability
* Helps to limit the risk factor present in its different products
* Helps to capture and understand the needs of the various target customers
* Helps to reinforce the brand name and organization name in the market and into the minds of customers
* Helps the organization to appeal to larger group of customers.
Product mix decision for any organization is not fixed and depends on the various changes in the market. Today’s market is customer driven, hence depending upon the various changing needs of the customers ,organizations too have to change its line of products and hence its product mix.Therefore,for successful product mix decisions, its always important for organizations to undergo product analysis with respect to its changing customers needs and life style.
All the products in the product mix do not have the same contribution towards the organization sales and growth. Depending upon this, they may be categorized as stars, cash cows, problem children and dogs.
* Stars are the products in the product line, which have high growth and it has maximum contribution towards organization market share and profitability. They are source of high cash flows and therefore, organization should put all its marketing resources to en-cash the present market trend.
* Cash Cows are the products which hold a good amount of market share but have low growth opportunities. In such type of products, minimum marketing efforts helps to achieve the target and any extra effort does not create any difference.Therefore,for such products organizations should minimize their marketing efforts and concentrate more on star products.
* Problem children are the products which have the potential to become star products or cash cow products .They have low market share and hence require correct marketing strategies to promote such products.
* Dogs are the products in the product line which have low growth and low market share. Any extra efforts do not help them to increase their sales and profitability and so they should be maintained in the line till they have loyal customers and then they should be slowly removed from the product line.