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Product Mix

The complete set of products and/or services offered by a firm

What is Product Mix?

Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services.

 

Product Mix

 

Dimensions of a Product Mix

 

#1 Width

Width, also known as breadth, refers to the number of product lines offered by a company. For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.

 

#2 Length

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). Within each product line series are three types of cars. In this example, the product length of the company would be 6.

 

#3 Depth

Depth refers to the number of variations within a product line. For example, continuing with the car company example above, a 3-series product line may offer several variations such as coupe, sedan, truck, and convertible. In such a case, the depth of the 3-series product line would be 4.

 

#4 Consistency

Consistency refers to how closely related product lines are to each other. It is in reference to their use, production, and distribution channels. 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.

 

Illustration of a Product Mix

 

Product Mix

 

In the illustration above, the product mix shows a:

  • Width of 3
  • Length of 5
  • Product Line 1 Depth of 2
  • Product Line 2 Depth of 1
  • Product Line 3 Depth of 2

The mix is considered consistent if the products in all the product lines are similar.

 

Example of a Product Mix

Let us take a look at a simple product mix example of Coca-Cola. For simplicity, assume that Coca-Cola oversees two product lines: soft drinks and juice (Minute Maid). Products classified as soft drinks are Coca-Cola, Fanta, Sprite, Diet Coke, Coke Zero, and products classified as Minute Maid juice are Guava, Orange, Mango, and Mixed Fruit.

The product (mix) consistency of Coca-Cola would be high, as all products within the product line fall under beverage. In addition, production and distribution channels remain similar for each product. The product mix of Coca-Cola in the simplified example would be illustrated as follows:

 

 

Importance of a Product Mix

The product mix of a firm is crucial to understand as it exerts a profound impact on a firm’s brand image. Maintaining high product width and depth diversifies a firm’s product risk and reduces dependence on one product or product line. With that being said, unnecessary or non-value adding product width diversification can hurt a brand’s image. For example, if Apple were to expand its product line to include refrigerators, it would likely have a negative impact on their brand image with consumers.

In regard to a firm expanding its product mix:

  • Expanding the width can provide a company with the ability to satisfy the needs or demands of different consumers and diversify risk.
  • Expanding the depth can provide the ability to readdress and better fulfill current consumers.

 

Summary

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. This, in turn, generates substantial profits for the firm. On the other hand, poor product mix expansion can result in a detrimental impact on a company’s brand image and profitability.

 

Related Readings

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below:

  • AIDA Model
  • Market Planning
  • Substitute Products
  • Walmart Marketing Mix

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!