Very rarely does a company — big or small — have only one type of product offering that it focuses on. Unless that one product is capable of doing something so unique that no other competitors can hope to match it, mature product markets will typically have five or so products from different companies competing for the same or similar market share.
Companies try to get around this lack of variation in a mature product market by offering ancillary services, features, or products that either complement or add to the experience that each individual product individually lacks. This is where a strong product mix strategy helps these companies stand out from one another and grow their market share.
As a product manager, it is your responsibility to understand how your company sees themselves competing with others. Not only must a product manager understand how each product in the mix competes against each of their competitor’s relative offerings, but must also factor in the company’s overall product mix strategy.
In this article, you will learn what a product mix is and how to best use it to diversify your company’s offerings.
A company’s product mix essentially refers to its portfolio of product lines, services and individual products that it has available for purchase or subscription. Each product may compete in different markets or industries — also known as product lines — and each of these products may offer different types of functions and features compared to products offered by competitors.
You can utilize product mix in order to offer alternatives to products from your competitors. To do so, you must have a product mix strategy that allows you to offer a more compelling “story” or to offer a range of better product alternatives.
The following are the inherent advantages of pursuing a product mix strategy within your company:
There are always pros and cons to every product mix decision. Some people err on the side of caution and refuse to contemplate a world outside of the one or two products that they offer. This plays off the assumption that it’s better to be an expert and provide exceptional experiences in as few product lines as possible rather than spread yourself too thin.
For some, however, diversifying your product line makes sense as it allows you to compete in different industries at the same time. This is especially the case if your competitors are typically in multiple industries themselves.
As mentioned above, one of the reasons for pursuing a product mix strategy is to not just offer differentiating products in multiple markets or industries, but to also form synergies between these products.
Apple is a good example of this, as each device — iPhone, iPad, Apple Watch, etc. — works together on a unified software platform and helps each other perform ancillary or complimentary services. Pursuing this type of product mix strategy helped to set it apart from their other competitors, whose product lines never interacted and almost felt like individual pieces to a puzzle, rather than one cohesive whole.
A product mix strategy helps a company diversify risk and minimize the chance of financial failure due to a product, or an entire product line, not being a critical or prominent success. This can happen for a number of different reasons.
These reasons could include competitors offering a more advantageous and compelling product to the consumer, fluctuating market demand, or simply just not finding product-market fit for the particular product that you are trying to sell.
Regardless of the reason, it is important to appropriately manage your investments in different verticals of your product mix strategy to optimize your products that are doing well and re-thinking products that aren’t contributing to the company’s overall success.
A product mix can be broken into the following three elements:
Having a product mix provides you with the flexibility to change the type and breadth of your offerings. In total, the different ways in which a strategy can be changed or tweaked include:
It might seem that a PM may have little to no influence on how a product mix strategy is decided and acted upon, however, this is far from the truth. Product managers tend to be the first call when it comes to deciding on whether or not a new product line needs to be introduced, or what new features and functions are needed to enhance existing products.
As a PM, you continuously listen to the customer to ensure that your product continues to serve your customer base. Because of this, you have direct insights into customer pain points and can drive expansion, contraction, or enhancement practices.
There are three main ways you direct product mix strategy as a PM:
Decisions around product mix strategy tend to come from customer feedback. However, to determine which option best addresses the customer problem, it’s up to you to relay back to the overall business the overarching issues the customer faces.
The solution may take the form of an enhancement to existing capabilities, however, sometimes there are problems so convoluted that it might just be easier to expand or contract a certain product offering.
In any case, those decisions must be made in accordance to customer sentiment, the type of problem to solve, and the typical effort needed to execute the solution.
Conducting a full competitor analysis here will help you decide whether or not you’re falling behind in a particular category against other products, but also whether the shortfall is significant enough to dictate either an expansion, contraction, or enhancement strategy to effectively compete in the same space.
The responsibility to conduct said competitor analysis falls on you as the product manager, as an expert of the customer and of the industry as a whole.
Finally you can influence the product mix strategy by having an understanding of where the company is making the most money from and how to either optimize or add to the company’s current cash flow. For example, if current product offerings aren’t generating enough revenue due to a lack of differentiation from other competitors, an expansion of the product mix will help you increase revenue.
Product mix encompasses not only the range of products that you offer, but also the relationships and performances of each product in your overall portfolio. As your company grows and evolves, you need to continuously reassess your product mix to make sure that you remain competitive in your market.
As a PM, you serve as the key touch point between your customers and your product. Your unique knowledge will help to guide product developments in the future and assess whether an expansion, contraction, or enhancement is necessary.
Featured image source: IconScout
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