What is Product Mix?
There are thousands of definitions about what Product mix is. We’ll suggest you a “simple one”:
Roughly Speaking, Product Mix refers to the number of products a certain company or Product line has.
* For example:
If you are talking about:
Coca-Cola Beverage Product-Line mix, you’ll be talking about:
- Classic Coke.
- Diet Coke.
- Coke Zero.
- Fanta, etc.
If you are talking about PepsiCo Global company Product Mix, you’ll be talking about:
- Pepsi (and within the Pepsi beverage Product Line, you have lots of alternatives).
- Lays (chips).
- Quaker (breakfast cereals), etc.
We like keeping it simple this way:
- Depending on what are you talking about, Product Mix refers to the final product assortment (Coca-Cola previous example) offered within a certain Product Line (beverages in that case), or the different Product Lines available (such as in the PepsiCo example).
We’ll now explain you the Product Mix 4 dimensions before start talking about how using it in order to improve your sales and product positioning.
Four dimensions of Product Mix
This image shows easily all the 4 Product Mix dimensions (the text explanation can be, sometimes, very confusing).
- Product Mix Width:
As you can see, the Product Mix width comprehends all the different product lines a certain company has.
- Product Line Length:
Within each Product Line described on the Product Mix Width, the Product Line Width (again) represents the Product Line Length.
- It is the Product Width of each Product Line. (width x width).
- Product Line Depth:
Within each Unique Product Line, its length is nothing but the number of final alternatives it has.
As its mere name indicates, it reflects how well related are all the products between each other.
Let’s see it with one example:
Pepsi Product Mix example
In case you don’t know, PepsiCo is a big company that owns different brands, not only the famous Pepsi beverage.
We’ll use the same “products” we mentioned before in order to explain easily the Product Mix 4 dimensions:
* As you can see, these analyses can be developed in infinite ways; is 7Up within the beverage category or should have its own Product line? What about Doritos?…
PepsiCo has much more products actually. However, we chose just this brief selection in order not to get crazy while developing this scheme.
- We hope that this scheme is useful for you to understand these 4 dimensions with a practical example.
But… What about the consistency of its products?
We could easily state that they are all highly related.
- They are all snacks and beverages (not including Quaker oat meal).
Check Unilever’s Product Mix consistency:
- They have deodorants, Ice creams and butter… among many other Product Lines.
We don’t want to spend so much time on these 4 dimensions since we find them confusing and sometimes a bit “useless”.
They are interesting in order to have quick numbers when analyzing a certain company, but we have barely used them in years.
We would like to focus on why is Product mix so important, and how could you use it in order to improve your product positioning, relevance and sales.
Why is Product Mix important
This is the real Key question.
If you are selling a single good product, why should you worry about your Product Mix?
The trends change. And unless you have a balanced Product Mix, you’ll be putting all your eggs in one basket.
Basically, with a proper Product Mix you’ll:
- Improve your margins.
- Attract new customers.
- Guarantee diversified income sources.
Lets explain it with helpful examples:
1. Improving your margins with a proper Product Mix
Sometimes, companies don’t get their margins from the product they are mainly advertising, but the product/s they placed you next to it.
- Think about the “Popcorn” example we explained in the “Branding” page.
The more products you offer, the more chances you’ll have to hook a customer with a high margin one.
Be careful: we are not saying that you should have 1.000 products.
We love focusing on one single good product, but once your main central product has succeeded, you’ll need to offer “something else” to your customers.
Last thing you want is “bored customers”.
Initially, we’d suggest you to offer side high-margin products.
- Maybe not mainstream but niche products.
Once you have tested the market, you’ll be able to decide which path to take.
After a good Market Research (check our “Market Research” page) you’ll be able to decide whether a new product worth be launched only after a controlled launching test.
Most successful Product Mix ever: Apple's iPhone
We’ve talked several times about Apple and the iPhone, but if you think about it carefully, Apple risked a lot with this new product.
Apple was and always had been a computer company. That is all.
Years went by, and they started offering different Technology products; increasing their Product Mix.
- Mp3 players.
- Laptops, etc.
And on 2007, they launched the iPhone.
Although initially the iPhone had several difficulties to be launched:
- It was very expensive.
- People were not used to spend that amount of money on a mobile phone.
- Nobody knew for sure if it would be a successful product.
Suddenly, Apple was not regarded as a Computer company anymore but a Technology one.
Their margins increased enormously.
- Some analysts say that Apple has an average margin of 60% in their iPhones.
What if Apple had never diversified its Product Mix?
Nowadays, Apple is in the opposite situation:
- The iPhone is so successful that they are constantly thinking about other new products in order to diversify their income.
See the Business-Insider Picture below:
With this example you can appreciate 3 things:
- Increasing your Product Mix can be the key to success for your company.
- If you are extremely successful with one product you may end up in the opposite position.
- Hence, you should always be thinking about new products.
2. Attracting new customers with Product Mix
Normally, as soon as you have a successful product on the market, your customers will start being well defined.
This is a good thing since it allows you to target them more efficiently.
However, it may limit your chances to reach other new potential customers.
Increasing your Product Mix can be an intelligent way of approaching new customers.
Depending on the type of customer you’d like to approach, you should launch one product or another.
Lets see it with another example:
Louis Vuitton and Supreme Product mix example
You surely know Louis Vuitton.
It is one of the most luxury brands in the world.
Which problem faced Louis Vuitton? The young generations don’t follow the traditional luxury trends:
- Certain styles are regarded as “old”.
- Some young “rich” kids prefer extravagance rather that sobriety.
Gucci launched a successful “millennial”-oriented Product line with extravagant designs:
One of Gucci’s new successful designs.
And, Louis Vuitton was falling behind this new design trend… until they started working with “Supreme“.
“Supreme” is a skateboarding clothes brand with a very good market penetration in the specific segment where Louis Vuitton was failing (if you can call it fail).
- The Millennial-alternative-not-traditional segment.
Both brands started to collaborate in both luxury yet casual products.
The success was immediate.
But… Why had it been a success for both companies equally?
Supreme increased its Brand name:
- Collaborating with the most luxury brand in the World, being able to fulfil all the image and quality standards is absolutely remarkable.
Louis Vuitton finally approached new customers:
- LV learned what do these customers like.
- Moreover, they may become loyal LV clients some day.
In this example you can appreciate how, no matter whether you are Louis Vuitton or any other successful giant company: you must always be worried about approaching new clients.
3. Guarantee diversified Income sources with your Product mix
As you may already know, it is better to have multiple income sources rather than a single one.
The more diversified your income sources are the less likely will be that you fail.
This is the most obvious and immediate reason to increase your Product Mix.
You never know how the market will be in 2 years: new trends, products, marketing campaigns…
- You must be ready with different products.
Disney Product mix example
Disney is the perfect example of well-balanced Product mix.
They started with Mickey, Donald Duck and their friends.
Today, Disney owns:
- Disney Classic Movies.
- Start Wars franchises.
- Pixar company, with:
- Toy Story.
- The Incredibles.
- Cars, etc.
- Marvel franchises:
- etc, etc…
- 20th century Fox.
- Many other successful franchises.
They have a different product for everyone. And each product generates different income sources:
- Movie Theatre.
- Merchandising that is sold all around the world.
- Theme parks.
- Broadcasting licenses.
For each Star-Wars official Merchandise sold, Disney is earning money, for example.
With all these income sources, Disney would have it difficult not to success.
Moreover, they constantly start new projects; some of them are very successful while others don’t.
- For example: The “Han Solo” movie didn’t success as expected, so they have already said that there won’t be a second one.
We know that this is an extreme example of a huge company, but you can easily find smaller companies that succeeded because they had the right offer at the right time, close to you.
Caring about your Product Mix is a must when looking for success.
The common classification divides the Product mix into:
- Product Mix Width.
- Product Mix Length.
- Product Mix Depth.
However, Product Mix is useful mainly because it allows:
- Improving your margins.
- Attracting new customers.
- Guaranteeing diversified income sources.
We don’t encourage you to start launching lots of new unconnected products:
You should first success with a particular one.
- Then you must worry about what’s next.