product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. length refers to the total number of products in a firm’s product mix. for example, consider a car company with two car product lines (3-series and 5-series). in this example, the product length of the company would be 6. depth refers to the number of variations within a product line. in such a case, the depth of the 3-series product line would be 4. consistency refers to how closely related product lines are to each other. the consistency of a product mix is advantageous for firms attempting to position themselves as a niche producer or distributor. in addition, consistency aids with ensuring a firm’s brand image is synonymous with the product or service itself.
for simplicity, assume that coca-cola oversees two product lines: soft drinks and juice (minute maid). the product (mix) consistency of coca-cola would be high, as all products within the product line fall under beverage. the product mix of coca-cola in the simplified example would be illustrated as follows: the product mix of a firm is crucial to understand as it exerts a profound impact on a firm’s brand imagebrand equityin marketing, brand equity refers to the value of a brand and is determined by the consumer’s perception of the brand. maintaining high product width and depth diversifies a firm’s product risk and reduces dependence on one product or product line. successfully expanding a product mix can help a business adjust to changing consumer demand/preferences while reducing product risk and reliance on a single product or product line. on the other hand, poor product mix expansion can result in a detrimental impact on a company’s brand image and profitability. cfi is the official provider of the financial modeling and valuation analyst (fmva)™fmva® certificationjoin 350,600+ students who work for companies like amazon, j.p. morgan, and ferrari certification program, designed to transform anyone into a world-class financial analyst.
we will explain the basic product mix pricing strategies that change a product’s pricing when it is part of a product mix. in fact, when you buy the razor, you are a captive customer for the products the brand makes the real money with – the higher-margin replacement cartridges. therefore, the strategy for setting a product’s price often has to be changed when the product is part of a product mix. since the various products in the mix have related demand and costs, but face different degrees of competition, pricing is difficult. thus, in product line pricing, the firm must determine the price steps between various products in a product line based on cost differences between the products, competitors’ prices, and, most importantly, customer perceptions of the value of different features. optional product pricing is the pricing of optional or accessory products along with a main product.
we speak of captive product pricing when companies make product that must be used along with the main product. captive product pricing is an extremely powerful strategy in the set of product mix pricing strategies. the difficulty is in finding the right balance between the main product and captive product prices. but by using by-product pricing, the company tries to find a market for these by-products to help offset the costs of disposing of them and make the price of the main product more competitive. the last one of the product mix pricing strategies is product bundle pricing. you see that setting the prices for a product becomes harder when it is part of a product mix – because all products and their prices must be interrelated.
product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services a successful product mix strategy enables a company to focus efforts and resources on the products and product thus a product mix is a combination of product lines, which are combinations of individual products. product mix. product, .
therefore, the strategy for setting a product’s price often has to be changed when the product is part of a product mix. then product mix strategies depend on: resources; objectives; past and current sales; consumer trends. product mix discuss strategies for adjusting products in response to changes in consumer taste and the marketplace,
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