Now you should ask a question what is the optimum size of a product line?
Product line length
Now you should ask a question
what is the optimum size of a product line?
A line is too long if after
eliminating a product is results into increased profits. A line is too short
when any addition to it results into increased profits.
One thing should be clear to you
that the Company’s overall objectives do affect the length of its product line.
For instance, a company may have the objective of expanding its market share.
It will then have a longer product line. Contribution of individual products to
profits may be ignored. However, a company whose objective is to have larger
profits will have a shorter product line consisting of those items, which
contribute to profits substantially Product lines have a tendency, to lengthen
over a period of time. Many a time, a firm may, have extra capacity, which is
used for developing new items. . Sales people and trade put pressure on
management to keep on adding items to a product line so as, to satisfy their
Lengthening of the line shoot up
costs. At some point, this must come to halt. Loss making items are then
eliminated. The contribution of items to profits is studied. Thus in the life
of an organization, there is a cycle of longer product line followed by a
pruned product line. This cycle is repeated again arid again.
Tags : MARKETING MANAGEMENT - Product Mix Decisions
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