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Product Line Decisions

Made by students Of Group # 1408

Goryatcheva MargaritaMedvedeva Asya

PRESENTATION

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Product Line Decisions

• A product line is a group of products that are closely related.

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

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Product Line-Length Decision:

• Dropping items

• Increasing items:

- Stretching the line

- Filling the line

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Product Line-Stretching Decision

Every company’s product line covers a certain range of the products offered by

the industry as a whole. There are 3 of basic price-ranges:

1.Low2.Medium

3.HighThese ranges can also be intervening to

each other.

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Examples of Price Range

Auto WAZLamborghini

ToyotaBMW

High price range

Medium-high price range

Low price range

Low-to-Medium price range

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Product Stretching

It is a product lengthening beyond the current range.

This process can be held:

Two-ways UpwardsDownwards

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Downward Stretch

Quality

HighLow

Hig

hLo

w

Pri

ce

Present Products

New Products

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Downward Stretch

Many companies initially locate in the Upper-end of the market and later….

Stretch their lines downwards.

WHY?

1.To Respond to the ATTACK in the Upper-End- Invading the Low-End2.To Plug an empty hole by Low-End EARLIER than competitors3.To Expand the assortment GAINING market share

4. To Fend-Off from Low-Priced CLONES

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Downward Stretch

Taking Risks:

1.Making competitors counteract by moving to HIGHER End

2.Company’s dealers may not be able to handle Low-End’s

3.Low-End may cannibalize the High-End…

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General ElectricThe case

GE is a Market Leader in CAT Medical Scanners for hospitals.

The company learned that a Japanese competitor penetrates into the market with its compact, highly advanced, less

expensive machines.

Decision:

Introducing the GE’s lower-prices canners on market.

After-Effects:

GE’s low-priced version would hurt the high-price items of CAT scanner.

Solution: GE’s Manager:

“Aren’t We better off to cannibalize ourselves than to let Japanese do it?”

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Is it a Failure or a Success?American companies:

Is a failure to plug low-ends

Resist to build smaller cars, copying

machines etc.

Japanese companies:

Is a success to plug low-ends

Major opening in producing low-end

electronics, chemicals. Moving in

quickly.

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Upward Stretch

Quality

HighLow

Hig

hLo

w

Pri

ce

New Products

Present Products

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Upward Stretch

Many companies at the Lower-End may want to enter the High-End…..

Stretch their lines upwards.

WHY?

1.Attracted by faster GROWING margins in High-End.2.Aimed to position themselves as FULL-LINE manufacturers3.Intended to create PRESTIGE image

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Upward Stretch

Taking Risks:1.Competitors may have the same goals

2.Rivals strike back by entering lower end of the market.

3.Prospective customers may not believe in “Reasonable” quality of goods

4.Distribution and salespeople may lack the talent to serve the higher end of the market

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Two-Way Stretch

Quality

HighLow

Hig

hLo

w

Pri

ce

Present

Products

New Products

New Products

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Two-Way Stretch

Companies in the middle range of the market may decide to…..

Stretch their lines in Two Directions.

WHY?

1.To hold-off copycats of company’s bestsellers

2.To be aimed at different target-market

3.To test the blood of all markets at one time

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Two-way Stretch

Taking Risks:1.Trading down of some customers by

discovering the advantage of cheaper items

2.Capturing the customers by competitors

3.Decline in high-End sales

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Marriott HotelsThe case

The Marriott Hotel group performed a two-way stretch of its hotel product line. Along with regular Marriott Hotel it added the Marriott Marquise line to serve the upper end of the market, the Courtyard, Residence Inn and Fairfield to serve the low-end of market.

Decision:

Establishing particular services in each segment of hotels to mold the loyalty of customers

After-Effects:

Conscious customers may soon discover reasonably-priced rooms of the lower chain

Solution:

“Marriott would rather capture it’s customers who move downward than passing keys to competitors”

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Product Line-Filling Decision

• - adding more items within the present range of the line.

Reasons:• Reaching for extra profits• Trying to satisfy dealers• Trying to use excess capacity• Trying to be the leading full-line company• Trying to plug holes to keep out competitors

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Product Line-Modernization Decision

• The central issue:

whether to overhaul the line piecemeal or all

in once

+ allows the company to see how customers and dealers like the new styles before changing the whole line

- allows competitors to see changes and start redesigning their own lines

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Product Line-Featuring Decision

- selecting one or a few items in

the line to feature.