How can a company build and manage its product mix and

product lines?

A product system is a group of diverse but related items that function in a compatible manner.

Product mix (also called a product assortment) is the set of all products and items a particular seller offers for sale.

I n o f f e r i n g a p r o d u c t l i n e , c o m p a n i e s n o r m a l l y d e v e l o p a

b a s i c p l a t f o r m a n d m o d u l e s t h a t c a n b e a d d e d t o m e e t

d i f f e r e n t c u s t o m e r r e q u i r e m e n t s a n d l o w e r p r o d u c t i o n

c o s t s .

SALES AND PROFITS The product line manager may consider

dropping this item unless it has strong growth potential.

The product line manager must review how the line is positioned against competitors’ lines.

Line stretching occurs when a company lengthens its product line beyond its current range

THREE TYPES

• Down market Stretch

• Up Market stretch

• Two way stretch

LINE FILLING

A firm can also lengthen its product line by adding more items within the present range.

Product lines need to be Modernized.

Product Mix Pricing In product mix pricing, the firm searches for a

set of prices that maximizes profits on the total mix.

Companies normally develop product lines rather than single products and introduce price steps.

OPTIONAL-FEATURE PRICING

Many companies offer optional products, features, and services with their main product.

Manufacturers of razors and cameras often price them low and set high markups on

razor blades and film.

Service firms engage in two-part pricing, consisting of a fixed fee plus a variable usage fee.

BY-PRODUCT PRICING The production of certain goods—meats, petroleum

products, and other chemicals—often results in by-products that should be priced on their value.

Pure bundling occurs when a firm offers its products only as a bundle