Product Mix - Maximizing Company Profits

 In product development parlance, the product mix is providing several similar products for sale together. Unlike product bundling where several similar products are grouped into one collection, which is then sold as single units, product mixing involves selling the products as distinct units. This enables the customers to buy them in bulk without much difficulty. Thus, you can expect to get returns on your investments faster and there will be a definite increase in the product's profitability.

It is important to understand how product mix decisions help the business. The best way to understand the importance of this aspect of product development is to look at it from the point of view of the customers. When customers can buy products from different shelves in different stores, there are greater chances that they will buy a product from your company than from another. Thus, the product mix decisions help the business to increase its customer base. To make things clear, here are some of the advantages of product lines:

Product diversification helps a firm to hedge product risks. If a firm can diversify its product offerings by offering a wide array of such products, it reduces its risk exposure. This is achieved through the selection of the product mix. A firm can choose to offer products that are either broadly defined or very specific. A broad mix helps the firm to cover more product categories, thus reducing the scope for risks.

Product diversification provides a firm with consistency. On one hand, companies diversify their product lines to protect against risk by not introducing new products within the same category. At the same time, the consistency provided by a diversified mix helps to reduce operating costs by allowing a firm to re-introduce products within the same category if the demand for them is growing.

Product mix decisions also help a company gain market share. When a company offers more than one product in its product portfolio, it can easily command a greater market share than a company that offers only one product line. Thus, diversifying the product portfolio ensures that a company gains a competitive advantage over its competitors. This is especially important for firms that target markets that are either very dynamic or sensitive to price changes. For example, a beverage company may diversify its product lines to include a variety of health and wellness products.

Finally, diversifying the mix helps a firm to improve its profitability. Diversified mix increases the profitability of a firm because it ensures that a firm spends money on products that make a company more profitable than its competitors. A company's product mix also affects its brand image. If a firm takes the approach of diversifying its mix to enhance profitability and brand equity, it helps to build long-term value in the business. However, if a firm takes the opposite approach, by spending heavily on a small number of established products, it may have less of an impact on its bottom line, but will fail to keep its competitors from capturing market share.

You can read about the product hierarchy and its relation in the marketing of the product category on thekeepitsimple a website for management related blogs