Product Line Analysis

Product Line Analysis:-

Companies normally develop a basic platform and modules that can be added to meet different customer requirements and lower production costs. Car manufacturers build cars around a basic platform. Homebuilders show a model home to which buyers can add additional features. Product line managers need to know the sales and profits of each item in their line to determine which items to build, maintain, harvest, or divest. They also need to understand each product line’s market profile.

SALES AND PROFITS:-


a sales and profit report for a five-item product line. The first item accounts for 50 percent of total sales and 30 percent of total profits. The first two items account for 80 percent of total sales and 60 percent of total profits. If these two items were suddenly hurt by a competitor, the line’s sales and profitability could collapse. These items must be carefully monitored and protected. At the other end, the last item delivers only 5 percent of the product line’s sales and profits. The product line manager may consider dropping this item unless it has strong growth potential. Every company’s product portfolio contains products with different margins. Supermarkets make almost no margin on bread and milk, reasonable margins on canned and frozen foods, and better margins on flowers, ethnic food lines, and freshly baked goods. A telecommunication company makes different margins on its core telephone service than on added services such as call waiting, SHAPING THE MARKET OFFERINGS and voice mail. Companies should recognize that items can differ in their potential for being priced higher or advertised more as ways to increase their sales, their margins, or both. MARKET PROFILE The product line manager must review how the line is positioned against competitors’ lines. Consider paper company X with a paperboard product line. Two paperboard attributes are weight and finish quality. Paper is usually offered at standard levels of 90, 120, 150, and 180 weights. Finish quality is offered at low, medium, and high levels. the location of the various product line items of company X and four competitors, A, B, C, and D. Competitor A sells two product items in the extra-high weight class ranging from medium to low finish quality. Competitor B sells four items that vary in weight and finish quality. Competitor C sells three items in which the greater the weight, the greater the finish quality. Competitor D sells three items, all lightweight but varying in finish quality. Company X offers three items that vary in weight and finish quality. The product map shows which competitors’ items are competing against company X’s items. For example, company X’s low-weight, medium-quality paper competes against competitor D’s and B’s papers, but its high-weight, medium-quality paper has no direct competitor. The map also reveals possible locations for new items. No manufacturer offers a high-weight, low-quality paper. If company X estimates a strong unmet demand and can produce and price this paper at low cost, it could consider adding this item to its line. Another benefit of product mapping is that it identifies market segments. the types of paper, by weight and quality, preferred by the general printing industry, the point-ofpurchase display industry, and the office supply industry. The map shows that company X is well positioned to serve the needs of the general printing industry but less effective in serving the other two industries. Product line analysis provides information for two key decision areas—product line length and product mix pricing. 

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