Product lining

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In marketing jargon, product lining is offering several related products for sale individually. Unlike product bundling, where several products are combined into one group, which is then offered for sale as a unit, product lining involves offering the products for sale separately. A line can comprise related products of various sizes, types, colors, qualities, or prices. Line depth refers to the number of subcategories a category has. Line consistency refers to how closely related the products that make up the line are. Line vulnerability refers to the percentage of sales or profits that are derived from only a few products in the line.

Product lining is a marketing strategy that companies adopt which they offer products in the same product line for sale individually (Krishnamurthi, 2007).[1] Product line is a group of related products defined by their functions and customer market, forming a “line" or category (Neubauer, Steffen & Margaria, 2003).[2] For instance, the variety of coffees that are offered at a café is one of its product lines and it could consist of flat white, cappuccinos, short black, lattes, mochas and etc. Alternatively, Product line of juices and pastries can also be found at a café.

In comparison to product bundling, which is a strategy of offering more than one product for promotion as one combined item to create differentiation and greater value, product lining consists of selling different related products individually (Chen, 1997).[3] The products in the product line can come in various sizes, colours, qualities, or prices. The benefits from having a successful product line is the brand identification from customers which result in customer loyalty and multiple purchases (Kekre & Srinivasan, 1990).[4] It increases the likelihood of customers purchasing new products from the company that have just been added into the product line due to the previous satisfying purchases (Krishnamurthi, 2007).[1]

Product Mix[edit]

In Marketing, the amount of product lines offered is referred as the width of product mix. Product mix, also known as product assortment, is the total number of variety of products that a firm sells to their customers (Learn marketing n.d.).[5] It measures the total number of product lines. Some companies would focus solely and sell only one type of product to specialise in, having said that, some would offer numerous types of products for the diversified markets, depending on the size and objectives of the entities. Each approach’s results vary from a lot of factors including location, market, trends and etc, therefore business should carefully consider their product mix. The width of product mix is one of the four dimensions of product mix along with the length, depth and consistency of product mix (Suttle, n.d.).[6]

Width[edit]

As mentioned above, the width of product mix is referred to the total amount of product lines that company offers. A diversified product mix can target the maximum amount of customers, however, such amount of product lines require many attentions and focus as each product line targets different groups of consumers and involve individual strategy and management. Although specialisation of products (narrow product mix) might be easier for businesses to operate and manage, it reduces the ability to reach out to diverse markets as they fail to offer sufficient options for consumers to cater their “needs and wants” (Marketing 91, n.d.).[7]

Length[edit]

The length of product mix refers to the total number of products sold by a company. A product line consists of many similar products defined by its functions and customer market while short product line consists of less amount of related products. Longer product lines maybe fulfill the satisfaction of customers, that said, overly dense product lines may result in competitions within the same line and lead of loss of revenue and customers. If product lines are too short, consumers’ options are limited and forced them to switch to competitors with a wider range of products (Marketing 91, n.d.).[7]

Depth[edit]

The depth of product mix pertains to the total amount of variations of product in a product line. It measures the variations of each product(subgroups) and they can be differences in size, flavours or other distinctive factors. For example, a brand would consider to have a depth of four if it sells two sizes and two flavours of soda (Learn marketing n.d.).[5]

Consistency[edit]

The consistency of product mix refers to how closely associated the products in the same product line are to each other, in terms of their use, production and distribution. A business’ production mix could be very consistent in distribution, yet extremely different in other areas such as use. For instance, a company may be selling health related items such as multi-vitamins tablet and magazines. Although both products fit into the same product line, they are completely dissimilar in use while one is editable and the other is not (Learn marketing n.d.).[5]

Product line extension and Product line stretching[edit]

When companies add a new item to a product line, it is referred as the product line extension. The purpose of it is to attract new customers who may not be familiar or satisfied with the current standard product line (Wilsom & Norton, 1989).[8] For example, when a lifestyle pharmacy decided to add in a high protein muesli bar into its current product line of muesli bar. Companies with an effective product line can employ product line extension in order to reach new demographic customers in different geographic areas.

When a business adds a line extension to the product line and if it is of a higher quality than the current products, it is considered as trading up or an upward stretch. Alternatively, if the new added item is of lower quality compared to other existing products, it is known as trading down or a downward stretch (Hanks, n.d.).[9] These stretches are known as Product line stretching. Supermarkets often apply product line stretching to its product lines by offering different grading of their own brand products to ensure all markets are covered for maximum interests from customers (Learn marketing n.d.).[5]

Product line pricing[edit]

Product line pricing is a product pricing strategy, used when a company has more than one product in a product line (Livesey, 1976).[10] It is a process that traders adopt to separate products in the same category into various price groups, to create different quality levels in the customers’ minds.

For instance, vehicle manufacturers produce their vehicle in different models including economy models, environmental models, luxury models and more. Each of them has an individual cost or price to display the difference in levels. With that being said, in order for any pricing techniques to be effective, demand elasticity, the whole product mix, product positioning strategy and the product life cycle have to be put into consideration to determine the best price for each product (More-for-small-business, n.d.).[11]

Product line pricing is most successful when there are obvious differences between each price group so customers are well acknowledged of the quality gaps in them. There are five common product line pricing strategies that companies implement, including price lining, captive pricing, price bundling, bait pricing and leader pricing (Quinonez, 2014).[12]

Price Lining[edit]

Price lining is a method of pricing different products for limited amount of prices. This strategy allows ease of administering and companies are able to predict their markets of customers profits much easier. Dollar Store is an excellent example of price lining as all products sold there are $1 (Krishnamurthi, 2007).[1]

Captive Pricing[edit]

Captive pricing is a strategy drawing consumers’ interests and encouraging purchases by offering a basic product for a really low price, however, they will have to purchase additional items in order to obtain the full value of the product they have received. Although the retailer might lose profit on the first sales item, they will manage to re-gain it back from the additional products that customers buy. For example, razor blades and razors manufacturers usually sell a razor handle for a unbeatable price while selling additional blade cartridges at a much higher price. Captive pricing is most effective when there are no other similar products from competitors in the same price range (Quinonez, 2014).[12]

Bundled Pricing[edit]

Bundled pricing is the approach of selling products and their accessories or other options as one product for one price. Consumers will not need to purchase each item separately but one bundled item and priced as one product. This would also be appealing to customers as normally they would be on sales and has the original price still tagged on the product to emphasize the price difference. For instance, retailers will offer a bundle deal for purchasing a new computer with its accessories, such as keyboard and mouse pad (Quinonez, 2014).[12]

Bait Pricing[edit]

Bait Pricing, also known as “Bait and Switch” is often considered unethical and sometimes illegal. It involves promoting items at a really low price to entice customers, with only limited supplies. Customers will come into the store looking for the advertised product and find out is out of stock or doesn’t even exist, and afterward be encouraged to purchase a comparable, higher-priced product that is available in store (Lazear, 1995).[13]

Leader Pricing[edit]

Similar to Bait pricing, retailers use leader pricing to entice customers to come into the stores by advertising items, the loss leaders at a low price. When they arrive at the stores aiming for the promoting products, they often end up buying extra products at their full prices. Therefore, businesses earn their profit off of the unplanned buying decisions by customers besides the loss leaders (Lazear, 1995).[13]

Related jargon[edit]

The number of different categories of a company is referred to as width of product mix. The total number of products sold in all lines is referred to as length of product mix. If a line of products is sold with the same brand name, this is referred to as family branding. When you add a new product to a line, it is referred to as a line extension. When you have a single saleable item distinguishable by size, appearance, price or some other attribute in your product line, it is called SKU-Stock Keeping Unit.

The marketing jargon for adding a product that is better quality than other products in the line is trading up or brand leveraging or up-market stretch. A line extension of lower quality is called trading down or down-market stretch. Trading down may reduce your brand equity by gaining short-term sales at the expense of long term sales. The jargon for "stretching the line" in both the directions is "two-way stretch".

Image anchors are highly promoted products within a line that define the image of the whole line. Image anchors are usually from the higher end of the line's range. When you add a new product within the current range of an incomplete line, this is referred to as line filling.

Price lining is the use of a limited number of prices for all your product offerings. This is a tradition started in the old five and dime stores in which everything cost either 5 or 10 cents. Its underlying rationale is that these amounts are seen as suitable price points for a whole range of products by prospective customers. It has the advantage of ease of administering, but the disadvantage of inflexibility, particularly in times of inflation or unstable prices.

See also[edit]

References[edit]

  1. ^ a b c Krishnamurthi, P. (2007). Product lining and price lining. Retrieved March 20, 2016, from http://fmcg-marketing.blogspot.co.nz/2007/10/product-lining-and-price-lining.html
  2. ^ Neubauer, J., Steffen, B., & Margaria, T. (2013). Higher-order process modeling: Product –lining, variability modeling and beyond. Retrieved from http://arxiv.org/pdf/1309.5143.pdf
  3. ^ Chen, Y. (1997). Equilibrium Product Bundling. The Journal of Business. 70(1), 85–103. Retrieved from http://www.jstor.org/stable/pdf/2353482.pdf?_=1459470623994
  4. ^ Kekre, S., & Srinivasan, K. (1990). Broader product line: A necessity to achieve success? Management Science, 36(10), 1216–1232. doi:0025-1909/90/3610/1216$OI.25
  5. ^ a b c d Learn marketing. (n.d.). Product strategy. Retrieved March 20, 2016, from http://www.learnmarketing.net/productobjectives.htm
  6. ^ Suttle, R. (n.d.). What is a product mix? Retrieved March 20, 2016, from http://smallbusiness.chron.com/product-mix-639.html
  7. ^ a b Marketing 91. (n.d).Product mix and product line. Retrieved march 20,2016, from http://www.marketing91.com/product-mix-product-line/
  8. ^ Wilsom, O.L., & Norton, A.J. (1989). Optimal entry timing for a product line extension. Market Science, 8(1), 1–17. Retrieved from http://www.jstor.org/stable/184099?seq=1#page_scan_tab_contents
  9. ^ Hanks, G. (n.d.). Examples of a product line extension. Retrieved march 20, 2016, from http://smallbusiness.chron.com/examples-product-line-extension-69425.html
  10. ^ Livesey, F. (1976). Product-Line Pricing. London, England: Macmillan Education.
  11. ^ More-for-small-business. (n.d.). Product line pricing: Part of your product pricing strategy. Retrieved March 20, 2016, from http://www.more-for-small-business.com/product-line-pricing.html
  12. ^ a b c Quinonez, N. (2014). 5 Product line pricing strategies you need to know. Retrieved March 20, 2016, from https://blog.udemy.com/product-line-pricing/
  13. ^ a b Lazear, P.E. (1995). Bait and switch. Journal of Political Economy. 103(4), 813–-830. Retrieved from http://www.jstor.org/stable/pdf/2138583.pdf?_=1459475087629