Page 153 - DMGT509_RURAL MARKETING

Rural Marketing

Notes 8.7 Product Line and Mix Decisions

8.7.1 Product Line

Product Line Strategies

We have looked at product strategy decisions such as branding, packaging, labeling, and support
services for individual products and services. But product strategy also calls for building a
product line. A product line is a group of products that are closely related because they function
in a similar manner, are sold to the same customer groups, are marketed through the same types
of outlets, or fall within given price ranges. For example, Nike produces several lines of athletic
shoes and Motorola produces several lines of telecommunications products. In developing
product line strategies, marketers face a number of tough decisions.
The major product line decision involves product line length—the number of items in the
product line. The line is too short if the manager can increase profits by adding items; the line is
too long if the manager can increase profits by dropping items. Company objectives and
resources influence product line length. Product lines tend to lengthen over time. The sales force
and distributors may pressure the product manager for a more complete line to satisfy their
customers. Or, the manager may want to add items to the product line to create growth in sales
and profits. However, as the manager adds items, several costs rise: design and engineering
costs, inventory costs, manufacturing changeover costs, transportation costs, and promotional
costs to introduce new items. Eventually top management calls a halt to the mushrooming
product line. Unnecessary or unprofitable items will be pruned from the line in a major effort to
increase overall profitability. This pattern of uncontrolled product line growth followed by
heavy pruning is typical and may repeat itself many times.

The company must manage its product lines carefully. It can systematically increase the length
of its product line in two ways: by stretching its line and by filling its line. Product line stretching
stretches its line downward, upward, or both ways.
Many companies initially locate at the upper end of the market and later stretch their lines
downward. A company may stretch downward to plug a market hole that otherwise would
attract a new competitor or to respond to a competitor’s attack on the upper end. Or it may add
low-end products because it finds faster growth taking place in the low-end segments.

New-product Development

Given the rapid changes in consumer tastes, technology, and competition, companies must
develop a steady stream of new products and services. A firm can obtain new products in two
ways. One is through acquisition—by buying a whole company, a patent, or a license to produce
someone else’s product. The other is through new-product development in the company’s own
research and development department. By new products we mean original products, product
improvements, product modifications, and new brands that the firm develops through its own
research and development efforts. In this chapter, we concentrate on new-product development.
New products continue to fail at a disturbing rate. One source estimates that new consumer
packaged goods (consisting mostly of line extensions) fail at a rate of 80 percent. Moreover,
failure rates for new industrial products may be as high as 30 percent. Why do so many new
products fail? There are several reasons. Although an idea may be good, the market size may
have been overestimated. Perhaps the actual product was not designed as well as it should have
been. Or maybe it was incorrectly positioned in the market, priced too high, or advertised
poorly. A high-level executive might push a favorite idea despite poor marketing research

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