5.7 : Product Mix Decisions

A product mix refers to the total assortment of products that a company offers for sale. It encompasses four dimensions:

• width (number of different product lines)
• length (total number of items within product lines)
• depth (number of variants of each product)
• consistency (closeness of products in terms of usage, production, distribution)

Product mix decisions are significant as they determine a firm's market positioning and potential profitability. Brands can optimize their product mix to meet diverse customer needs, maximize sales, and manage risk. For instance, a well-balanced product mix can reduce earnings volatility.

The width and length can help a company reach various consumer segments, while depth allows it to cater to diverse customer preferences. Conversely, consistency influences operational efficiency.

Driving factors for product mix decisions include market competition, environmental considerations, and firm-specific variables such as manufacturing flexibility and throughput per day. For example, market size and competition can influence an exporter's product mix. Meanwhile, environmental concerns can shape the optimal product mix.

Companies keep varying the product mix length, width, and depth to cater to diverse customer needs, exploit new market segments, enhance competitiveness, and maximize profitability.