MARKETING MANAGEMENT - Product Mix Decisions
Line stretching - Product Mix Decisions
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Line stretching occurs when this range is lengthened. This stretching could be upward, downward or both ways.
Line stretching
Line stretching occurs when this range is lengthened. This stretching could be upward, downward or both ways.
Most of the companies have range of products in its existing product lines, like Videocon has a range of TVs in its product line, right from budget TVs to premium TVs. Videocon entered the market targeting elite consumers. Later, it introduced 14 inch private to yuppies, Bazooka for Richie, Turbo tough to middle income aspirants, and Budgedt lien to the low income price conscious. ,
Here a company operates in the lower end of the market. By upward stretch, it proposes to enter the higher end. Perhaps, it is motivated by higher margin of profits, higher growth rate or a position of a full-range marketer. This decision has its own risks.
A well-established high-end marketer might assault the stretcher by stretching downwards. Besides, it is a question of credibility of a lower-end marketer -whether he will be able to produce high quality products. There is one more risk. The existing infrastructure of a low-end marketer may not be competent to deal with the high-end market.
Hindustan Lever introduced Surf Ultra to match Ariel of P&G and then introduced Surf excel-all in the premium category. Philips had its two in ones in the price range of Rs.1000-2000. To entice high quality conscious upend end consumers it introduced Power house a in the price range of Rs.6000-9000 range and powerplay in Rs 15,000-25,000.
Lets start with an example: like all of you know parker, parker started with pens only at high price but if we look at parker today we can see products available in the range of 50 Rupees which no one could have though of in older times.
Many companies start with high-end products, but later stretch downwards by adding 1ow-priced products. The down-end products are advertised heavily so as to pull customers to the whole line on the basis of price.
Hindusthan Lever introduced Wheel a low priced detergent to compete with Nirma when it found that Surf had lost its market share to Nirma. When Ariel Microsystems did not generate expected revenues, P&G introduced a green alternate at a reduced price and new products like New Ariel Super soaker at much lower price.
This strategy needs careful handling. The budget brand being promoted should not dilute the overall brand image. Besides, the budget
1. A competitor stretches upward and challenges the marketer. He counter-attacks him stretching downwards
2. Most companies start at the upper end, and then roll downwards.
3. The high-end market has a slow growth rate.
4. By filling the gap at the low-end, new competition is avoided.
5. Downward stretch has its own risks. The down-end item might cannibalize the high-end items. Besides, our downward stretch might provoke a competitor to move upward. Down-end product may not be managed properly as the company may not have that capacity. It may dilute the brand image of the company’s products. It is, however, needs careful consideration - a product line should not have a gap at the lower-end. It exposes the company to competition, e.g., American car companies faced the competition from small-sized, Japanese cars at the lower-end of the market.
Beside upward and downward stretch you can even stretch in two ways like several companies serve the middle-end market. They can stretch their product line in both the directions.
A hotel company operating hotels in the comfort category where each room has a tariff 2000-3000 a day might decide to have elite upper-end hotels with tariffs of Rs. 5000-7000 a lower-end budget hotels with tariffs of Rs. 600-1500 a day. Ashoka group of ITC has thus elite 5-Star hotels, at the upper-end comfort hotels at the middle-end and budget hotels like Ashoka Yatri Niwas at lower end.
Line stretching occurs when this range is lengthened. This stretching could be upward, downward or both ways.
Most of the companies have range of products in its existing product lines, like Videocon has a range of TVs in its product line, right from budget TVs to premium TVs. Videocon entered the market targeting elite consumers. Later, it introduced 14 inch private to yuppies, Bazooka for Richie, Turbo tough to middle income aspirants, and Budgedt lien to the low income price conscious. ,
Upward stretching
Here a company operates in the lower end of the market. By upward stretch, it proposes to enter the higher end. Perhaps, it is motivated by higher margin of profits, higher growth rate or a position of a full-range marketer. This decision has its own risks.
A well-established high-end marketer might assault the stretcher by stretching downwards. Besides, it is a question of credibility of a lower-end marketer -whether he will be able to produce high quality products. There is one more risk. The existing infrastructure of a low-end marketer may not be competent to deal with the high-end market.
Hindustan Lever introduced Surf Ultra to match Ariel of P&G and then introduced Surf excel-all in the premium category. Philips had its two in ones in the price range of Rs.1000-2000. To entice high quality conscious upend end consumers it introduced Power house a in the price range of Rs.6000-9000 range and powerplay in Rs 15,000-25,000.
Downward stretch
Lets start with an example: like all of you know parker, parker started with pens only at high price but if we look at parker today we can see products available in the range of 50 Rupees which no one could have though of in older times.
Many companies start with high-end products, but later stretch downwards by adding 1ow-priced products. The down-end products are advertised heavily so as to pull customers to the whole line on the basis of price.
Hindusthan Lever introduced Wheel a low priced detergent to compete with Nirma when it found that Surf had lost its market share to Nirma. When Ariel Microsystems did not generate expected revenues, P&G introduced a green alternate at a reduced price and new products like New Ariel Super soaker at much lower price.
This strategy needs careful handling. The budget brand being promoted should not dilute the overall brand image. Besides, the budget
1. A competitor stretches upward and challenges the marketer. He counter-attacks him stretching downwards
2. Most companies start at the upper end, and then roll downwards.
3. The high-end market has a slow growth rate.
4. By filling the gap at the low-end, new competition is avoided.
5. Downward stretch has its own risks. The down-end item might cannibalize the high-end items. Besides, our downward stretch might provoke a competitor to move upward. Down-end product may not be managed properly as the company may not have that capacity. It may dilute the brand image of the company’s products. It is, however, needs careful consideration - a product line should not have a gap at the lower-end. It exposes the company to competition, e.g., American car companies faced the competition from small-sized, Japanese cars at the lower-end of the market.
Two way stretch
Beside upward and downward stretch you can even stretch in two ways like several companies serve the middle-end market. They can stretch their product line in both the directions.
A hotel company operating hotels in the comfort category where each room has a tariff 2000-3000 a day might decide to have elite upper-end hotels with tariffs of Rs. 5000-7000 a lower-end budget hotels with tariffs of Rs. 600-1500 a day. Ashoka group of ITC has thus elite 5-Star hotels, at the upper-end comfort hotels at the middle-end and budget hotels like Ashoka Yatri Niwas at lower end.
Tags : MARKETING MANAGEMENT - Product Mix Decisions
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