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Principles of Marketing - Philip Kotler

The decision on the breadth of product assortment

Product Line Manager shall decide on the breadth of the range. The range is too narrow, if you can increase profits by expanding its new products, and too wide, if profit can be increased by excluding a number of products.

The breadth of the product portfolio is partly determined by the objectives, which the company has set itself. Firms who are trying to pass a comprehensive range of suppliers and / or seeking big gains in market share or its expansion, product range is usually wide. They are less concerned about the situation, when some of the goods produced by them do not give a profit. Firms also interested primarily in the high profitability of the business, usually have narrowed the range of profitable products.

With the product portfolio usually rasshiryaetsya16 time. To expand its product portfolio the company can in two ways: increasing his or saturating.

DECISION ON CAPACITY product portfolio. The product range of any company is part of the "container assortment offered by the industry as a whole. For example, in the automotive market car "BMW" took place in a number of models of medium and high cost. Capacity range occurs when the firm goes beyond that now produces. Capacity may either go down or up, or in both directions simultaneously.

Building down. Many companies initially located in the upper echelon of the market and then gradually expand its range to cover and underlying echelons. Capacity-down can be designed to deter rivals attack them or penetration into the fastest-growing segments of the market.

One of the great failures of a number of US firms was their reluctance to expand the range down to the lower echelons of its markets. The corporation "General Motors" opposed the release of a compact car, the corporation "Xerox" - copiers smaller and corporations "Harley-Davidson" - production of small motorcycles. In all these cases, the Japanese firms that see for yourself great opportunities, acted quickly and successfully.

Building up. Firms operating in the lower echelons of the market may want to penetrate the overlying. They can attract a higher rate of growth of the upper echelons of the market or increased profitability. Or maybe just a company wants to position itself as a manufacturer of a comprehensive range of products.

The decision to build up can be risky. Competitors at the higher echelons of not just good "entrenched" in their positions, but also can go to the counter, started penetrating into the lower echelons of the market. Potential buyers do not believe that the firm novice able to produce high quality goods. And finally, sales agents and distributors of the company may simply not have enough skills and knowledge to serve the upper echelons of the market.

Bilateral capacity. The company operating in the middle market tier, may decide to build its product range and the up and down simultaneously. An example is the strategy of the company's activity "Texas Instruments" in the market of pocket calculators. Before the advent of the firm on its market this lower echelons in terms of price and quality have been largely captured by "Boumar", and the top - to the same indicators of price and quality - the corporation "Hewlett-Packard" (see Figure 52..). Firm "Texas Instruments" offered its first calculators in the mid-market tier as the products of the average price and the average quality level. Gradually, she began to build up its portfolio in both directions. She suggested that more sophisticated calculators at the same price or even lower, and the company "Boumar", and eventually eliminate it as a competitor. At the same time the company "Texas Instruments" has developed a high-quality calculators, it began to sell them cheaper than the cost calculators Corp. "Hewlett-Packard" and repulsed at the last good share of sales in the upper echelons of the market. This strategy has helped the company increase bilateral "Texas Instruments" to take the lead in the market of pocket calculators.

Fig. 52. Bilateral capacity range on the market of pocket calculators

Decision about the saturation of the product portfolio. Expansion of product range may occur and by adding new products to its existing framework. There are several reasons that have resorted to saturation range: 1) the desire to obtain additional income, 2) attempts to satisfy dealers who complain of gaps in the existing portfolio, 3) the desire to use the unused production capacity, and 4) attempts to become a leading company with a comprehensive product range and 5 ) commitment to eliminate the gaps in order to prevent competitors.

Glut range leads to a decrease in overall profits, since the goods are beginning to undermine each other's sales, and consumers are confused. With the release of new products the company should ensure that the new product is markedly different from the already manufactured products.

Fig. 53. The breadth of the product mix and the saturation of the product portfolio of the corporation "Procter & Gamble