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BB0001 Q.3 What is product mix and product life cycle? Elaborate.

Answer:
Product Mix
One major management aspect involved in product policy is the decision concerning product mix. This is more important nowadays since most of the manufacturers are diversifying their products. The product policy decisions are made of these different levels - product mix, product items and product line. These „three in one‟ elements make the product planning effective. Product mix is the list of all products offered for sale by a company. It is defined as the composite of products offered for sale by a firm or a business unit.
The product mix is three dimensional, it has breadth, depth and consistency. Breadth is measured by the number of variety of products manufactured by a single manufacturer. For example, Bajaj Electricals produce a variety of electrical appliances such as fans, presses, mixers, lamps, etc. Depth refers to the assortment of sizes, colours and models offered within each product line. For example, Bajaj Electricals manufacture different varieties of models of fans and lamps. Consistency refers to the close relationship of various product lines either to their end use or production requirements or to distribution channels to other variables. Bajaj Electricals, for example, produce those goods which fall under the category „Electrical appliances‟. So there is consistency in their products.

Life Cycle of a Product
All products have certain length of life during which they pass through certain identifiable stages. Through the conception of the product, during its development and upto the market introduction, product remains in prenatal stage. Its life begins with its market introduction, then goes through a period during which its market grows rapidly, eventually, it reaches maturity and then stands saturated. Afterwards its market declines and finally its life comes to an end.

The important stages from the view point of marketing can be grouped into six: (i) Innovation, (ii) Growth, (iii) Maturity, (iv) Saturation, (v) Decline, and (vi) Obsolescence. This is termed as a product life cycle.

Different stages of product life cycle
Different stages of a product life cycle are as follows:
i) Introduction: It is the first stage of the product life cycle. The product is first introduced in the market. Heavy expenditure on advertisement is made to inform the customers about its qualities and characteristics and it is made popular among its users through promotional efforts.
Since the consumers are quite unaware of the products‟ characteristics, the sales do not pick up much. Consequently the
quantum of profits is low or rather negligible in this stage but risk factor is much higher. Competitors are not in the market because the product is new for the consumers. Most of the products fail in this stage due to lack of proper innovation efforts.
ii) Growth: After the product is introduced in the market, the product enters the second stage, i.e., growth stage. Under this stage, the product gains popularity among and recognition from the customers. The demand and sales go up tremendously due to promotional efforts. Consequently profits of the firm start going up because of two primary reasons: (a) Production and sales go up hence firm gets economies of large scale production and sales, and (b) Advertising and distribution costs, though they go up, per unit cost is reduced. High profits attract the competitors to enter the field.
iii) Maturity: The next is maturity stage. In this stage competition increases, though sales of the product go up but with a lower speed.
The advertisement and distribution costs increase in order to make the product service. The profit rate begins to decline. The producer makes search for new markets. Market and marketing research expenditure goes up. The prices came down due to stiff competition.

iv) Saturation: Next comes the saturation point. The sale value comes to standstill despite best efforts but it is at all time high. The competition is also at its peak in this period. Competition brings the cost of distribution and promotional efforts at new high; prices begin to fall and therefore profits come down. Fresh efforts are made in this stage to improve the product. New markets are tried.
v) Decline: This stage is brought about by the product‟s gradual displacement by some new innovation or change in consumer
behaviour. New and new products are introduced in the market by competitors. Sales go down inspite of all best efforts of picking it up. Cost control becomes necessary to reduce the price in order to compete.
vi) Obsolescence: As new products are developed and introduced by the competitors, the company‟s product dies out. Its demand and sales are likely to taper off. Profits are reduced to a negligible point. At this stage, it is advisable to stop the production of the product and switch off to other products.
The above discussion concentrates on the life cycle of a product beginning with its introduction into the market and ending with its death, (i.e., only post-marketing stages of a life cycle are given) but, a series of processes are to be undertaken by the management even prior to its introduction. The various expenses are made even before its introduction to the market on research, engineering and technical improvements, post-production and pre-marketing (test-marketing, advertising) etc.
This cycle of a product can be depicted in Figure:

Time
Fig. : The product life cycle model shows four stages that products and product categories move through.

Utility of product life cycle concept
The concept of product life cycle is very important from marketing point of view for a producer or a marketer. The main utilities of the concept are:
1. Life of a product is limited: According to the concept the life of a product is always limited. The product will die out over a period of time irrespective of the fact, that the product had made tremendous progress during the past. Knowing this fact, management always tries to improve its existing product or to develop a new product.
2. Estimation of profits: The quantum and rate of profits increases or decreases with the quantum of turnover. At introductory stage, profits are negligible, then they go up and after some time they begin to fall and gradually they move to nil. Thus, the management can well predict the firm‟s profits in different stages of the life cycle of the product.
3. Marketing programme: Different policies, procedures, and strategies are followed in the different stages of the life cycle of a product. So, management can prepare the marketing programmes accordingly and may get success.

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