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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 that is offered by the firm. 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 this 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 various 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 each product lines are to each other. It is in reference to their use, production, and distribution channels. The consistency of 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 create a negative impact on their brand image by consumers.

In regard to a firm expanding its product mix:

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

 

Summary

Successfully expanding a product mix can help a firm 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 firm’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 resources below:

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

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