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Product Line Management

Product Line Management involves organizing, analyzing, and strategizing around a company's total portfolio of products. This practice is particularly crucial for companies with a wide array of offerings, such as Unilever, Procter & Gamble, Coca-Cola, or FMCG companies like Dabur, Himalaya, and Patanjali. The goal is to manage the product portfolio effectively—deciding which products to retain, innovate, or phase out. Here's a structured explanation of the core concepts:

Key Concepts in Product Line Management

1. Product Item

A product item refers to an individual SKU (Stock Keeping Unit). Examples:

  • A table lamp.
  • A bar of soap.
  • A toothpaste tube.

Each distinct variation of a product is considered a product item.

2. Product Line

A product line is a group of related products offered by a company. These products usually share a common category or function. Examples:

  • Toothpaste Line: Includes 10 varieties of toothpaste.
  • Lamp Line: Includes 4 types: table lamps, ceiling lamps, track lamps, and desk lamps.

Note: A company may have multiple product lines, e.g., furniture, lamps, and tables for a home furnishing brand.

3. Product Mix

A product mix represents the total collection of product lines a company offers. It encompasses all product lines and their associated items.
Example:

  • Lamps: 4 types (table, ceiling, track, desk).
  • Tables: 7 types (kitchen, dining, coffee, outdoor, etc.).
  • Chairs: 5 types (dining room, living room, etc.).

Product Mix = Total Product Lines and Items.

Characteristics of a Product Mix

a. Length of a Product Line

  • Definition: The total number of items in a specific product line.
    • E.g., A lamp line with 4 types has a length of 4.
    • A table line with 7 types has a length of 7.

b. Width/Breadth of a Product Mix

  • Definition: The total number of product lines in the product mix.
    • E.g., A company offering 3 product lines (lamps, tables, chairs) has a width of 3.

c. Depth of a Product Line

  • Definition: The variety or number of variants available for each product item within a product line.
    • Example (Table Lamps):
      • Variants: Circular, cylindrical, with lampshade, without lampshade, etc.
      • Depth: 4 variants.
    • Example (Soap):
      • Sizes: 50g, 100g, 200g.
      • Aromas: Sandal, Lavender, Rose.
      • Depth: 3 (sizes) × 3 (aromas) = 9 variants.
      • Adding gel and solid forms: 18 variants.

d. Consistency

  • Definition: The degree of relatedness between different product lines in terms of:

    • End-use.
    • Production requirements.
    • Distribution channels.

    Examples:

    • Soap and detergents: High consistency (similar distribution/logistics).
    • Soap and ice cream: Low consistency (different storage, logistics, and retail requirements).

Why Length, Breadth, Depth, and Consistency Matter

  1. Resource Management: Helps in allocating resources effectively across product lines.
  2. Market Segmentation: Greater depth allows targeting micro-segments, while similar depth across lines targets broader segments.
  3. Cost Optimization: Consistent product lines can share logistics and distribution channels.
  4. Strategic Focus: Avoids spreading too thin across too many variants, ensuring focus and efficiency.

6.2.2 Product Line Strategies

Product Line Management involves determining the number and variety of product items to maintain in a company's portfolio. It emphasizes managing the depth, which is a critical factor contributing to the proliferation of product lines. Here's a detailed explanation:

Key Factors Influencing Product Line Depth

  1. Customer Heterogeneity:
    • When customer requirements vary significantly, the market divides into micro-segments.
    • Example: In the shampoo category:
      • Anti-dandruff shampoos
      • Anti-hair fall shampoos
      • Shampoos for straight hair or black hair
      • Shampoos for split ends
    • This segmentation increases product line depth to cater to diverse needs.
  2. Manufacturer's Ability to Offer Customization:
    • If the company has the technological and production capability to meet specific segment demands, the depth of the product line can increase.
  3. Competition:
    • High competition drives companies to innovate and further segment the market.
    • Low competition may result in limited innovation or segmentation.
  4. Category Size:
    • Companies assess if the market size and willingness to pay justify the effort of expanding the product line.
    • In price-sensitive markets, excessive segmentation may not yield returns.
  5. Company Objectives and Resources:
    • Decisions depend on whether expanding the product line aligns with the company’s profitability and revenue goals.
    • Risk of cannibalization: New products within the same line might eat into the sales of existing products.

Product Line Analysis

Purpose

To determine the optimal size of the product mix. Companies evaluate:

  1. Performance: Analyze sales, profit, and market trends.
  2. Competitor Profiling: Compare your offerings with competitors to understand positioning and sales impact.
  3. Iterative Assessment:
    • Add products if they increase market share and profits.
    • Drop products if they cannibalize sales or reduce profitability.

Key Considerations

  • An experienced brand manager must evaluate whether:
    • Adding new items increases revenue.
    • Reducing items improves profitability.

Product Line Strategies

1. Optimal Product Line Length

  • Too Short: If adding items increases profits, the product line needs expansion.
  • Too Long: If dropping items increases profits, the product line needs pruning.

2. Line Stretching

Expanding the product line beyond its current range, either upward or downward.

  • Upward Stretching: Target higher-end customers with premium offerings.
    • Example: A soap brand priced at ₹20 introduces a luxury variant at ₹50.
    • Example: Titan introducing designer watches at ₹50,000 or more.
  • Downward Stretching: Target budget-conscious customers.
    • Example: A luxury perfume brand introducing affordable deodorants for ₹500.
    • Example: A watch brand offering children's watches at ₹500.

3. Line Filling

Adding more items within the existing price range to cover market gaps and compete effectively.

  • Example: Car manufacturers offering multiple models in the same price range with variations (engine power, automatic/manual transmission, colors).
  • Objective: Increase profits, meet customer needs, and fend off competitors.
  • Risk: Cannibalization, where one product eats into the market of another.

4. Line Modernization

Revamping existing products in terms of:

  • Style, design, or technology.
  • Example: Maruti introducing Nexa for high-end cars.
  • Example: Hero Splendor with models like Splendor Plus, Splendor Pro, and Splendor Classic.

5. Line Featuring

Highlighting specific products as showpieces to attract customers to the entire product line.

  • Example: Apple advertising its iPhone Pro Max models as aspirational products to drive interest in its other models.
  • Example: Jewelry brands showcasing heavy designer items in advertisements.

6. Line Pruning

Eliminating unprofitable or underperforming items from the product line.

  • Indicators: Declining sales, negative feedback, and lack of market interest.
  • Objective: Focus resources on profitable items and reduce inefficiencies.
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