Product mix definition
/What is Product Mix?
Product mix is the full range of offerings that a business sells. This is critical to the ability of an organization to generate sales. Product mix can refer to both physical products and services of all types. It can also refer to the mix of features and functions that are available to customers. The product mix of an entity can be evaluated in terms of the following factors:
Width. This is the number of product lines being offered to customers.
Length. This is the total number of products being offered to customers.
Depth. This is the number of variations in which products are offered.
Consistency. This is the extent to which the product lines being offered relate to each other.
Profit Impact of a Broad Product Mix
A business can generally achieve a higher sales level on a per-unit basis if it offers a broad product mix. By doing so, it can cross-sell customers on more than one item. For example, a customer that wants to buy a software package might also be interested in add-on software that extends the usability of the basic package. For this reason, companies tend to increase their product mix over time, to bolster their growth.
Competitive Impact of a Broad Product Mix
It is especially important to have a broad product mix when you want to keep customers from moving to competitors. With a broad mix, it is more likely that customers will find products that meet their specific needs without having to shift to a competitor. For this reason, companies are always talking to their customers regarding their specific needs, to see if additional products can be developed for them.
Product Mix in Acquisitions
Extending the product mix of an organization is one of the chief reasons for an acquisition. The acquiree may have one or more products that will fill an unaddressed spot in the product mix of the acquirer. This is an especially appealing option when it would be inordinately expensive or time-consuming for the acquirer to build these products in house.
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Example of a Product Mix
As an example of product mix, a manufacturer of microwave ovens offers a broad range of products for sale, based on price and the intended customer. For the retail market, the firm sells small units designed for dormitory rooms and extending upward into more expensive units that are intended to be installed in a fancy kitchen. For the commercial market, the firm sells more robust units that are intended for use in commercial kitchens.
Similar Terms
Product mix is also known as product assortment.