A product mix is the complete range of products offered by a business. It is also referred to as product assortment, and consists of all the product categories or product lines presented to the customer.
A fashion boutique could have a product mix that consists of:
Each of those lines could then be further categorized into different sub-categories or subclasses, depending on the merchandise hierarchy of the business. All those categories and sub-categories together form the product assortment.
Product Mix Vs. Product Line
A product line is a set of related products inside a product mix. It is also referred to as product category.
In the previous example, the tops, bottoms and accessories would be separate product lines, that together form the retail store’s product assortment.
Why Is It Important?
Planning the product mix offered to the customers by the business plays an important role in delivering sales and in creating the company’s positioning in the market. It is a very important aspect of category management and merchandise planning.
It also plays an important role in allocating the buying budget to specific products, based on the contribution that is planned for them in the product mix.
Effect on Sales
A carefully crafted product assortment can create great opportunities for up-selling and cross-selling existing customers, and thereby maximizing the average order value and the return on marketing spend.
For example, if the business is selling candles, then offering sleeves for those candles will be addressing the same customer and creating a cross selling opportunity.
If the business is selling small candles, then expanding the depth of the assortment with bigger sizes will present great opportunities for up-selling the same customers.
Effect on Positioning
On the other hand, many businesses could be taking this too far with expanding their product assortment to include unrelated products and categories in an inconsistent and incoherent manner, and so they fall into the trap of trying to be everything for everyone.
This negatively affects the business’ positioning in the market and can result in exactly the opposite of what they were trying to achieve.
This is why planning a product assortment should be done based on analysis of the business itself, as well as the market and customer segment it is trying to target.
Product Mix Dimensions
There are 4 dimensions to consider, while assessing a product mix. In retail, the most commonly used ones are depth & breadth.
Also referred to as breadth.
This is the number of different product lines or categories inside the product assortment.
For our fashion boutique example the width = 4
Note: At a more granular level when analyzing categories or brands, the breadth will be referring to the number of different products and not product lines/categories.
The different variations of products inside the product line
If a top comes in 3 colors and 4 sizes each then its depth = 3×4 = 12
The total number of different products offered under all product lines.
Consistency refers to how closely the different products and product lines offered are related to each other. As mentioned before, if the company starts adding many unrelated lines in an inconsistent manner, it could affect its positioning in the market.
Product Mix Analysis
Category managers and merchandise planners should be doing a product mix analysis on a regular basis.
While performing a product mix analysis, the following factors should be taken into consideration:
- The role of each category or product line
- The performance of each category against set goals
- The dimensions of the product mix, i.e it’s depth vs. breadth
Based on this analysis, they should be taking the right actions to adjust their buying strategy for coming seasons, with the primary goal of delivering the business financial goals through correct buying decisions.
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Retailer & Founder of Retail Dogma, Inc.
Rasha has 14 years of retail & ecommerce experience. She has started an ecommerce business in 2008, and later worked at H&M, Bath & Body Works, Victoria’s Secret and Landmark Group. She’s lived in 4 different countries, speaks 3 different languages and holds a BSc in Pharmaceutical Sciences and an MBA in Strategic Management & Marketing.