Office product range and the range of products the company
The commodity nomenclature - a group of (series) of goods closely related or similarity functions, or because they sell the same group of buyers or through the same commercial establishments, or within the same price range.
Product range - a collection of all commodity items offered by a particular vendor customers. The main characteristics of the product range is the breadth (number of product groups products), saturation (the total number of all commercial units), depth (options offering products within each product line) and harmonichnist (convergence products of different product groups in terms of their end-use requirements of production, distribution channels, etc.).
Formation of the product range and the range of goods company necessarily requires coordination riznonapryamlenyh interests. So, in terms of products, will be ideal as "a smaller number of headings, stability of production over a long period, the output of goods large series, low production costs and so on. From the perspective of consumers - quite the contrary. Thus, the formation of product lines and nomenclature requires an optimal value of considering the interests of both producers and consumers, but with the last priority.
Choose the best range of products the company can process described below.
Traditionally profit is calculated as follows:
Revenue from sales - Cost of production =
= Gross profit - Operating expenses = Net Income.
Given the division of costs into fixed and variable, the formula can get the following:
Revenue realizatsiyi- Variable costs = Profit coverage - Fixed costs = Net Income.
In the event that income is covering fixed costs, saying that the company reached break even. This means that business income is enough to cover all costs, but profit is not to be. This is called the break-even point or critical point in production or profitability threshold.
The percentage coverage ratio of profit to total income from sales profit ratio called coverage. This factor is extremely important because it indicates the change in profit margin coverage increase or decrease in income from the sale. Thus, if the rate of profit coverage of, say, thirty%, this means that the increase in income from the sale of 1 USD earnings coverage will increase by thirty kopecks. Net income also increased by thirty kopecks. provided that it shall not change the structure and value of fixed costs. Thus, knowing the rate of profit coverage quite easily and quickly can be calculated as net profit increased by increasing sales volumes (of course, if fixed costs remain the same).
Using this ratio can be determined also break even:
Enterprises tend to produce wide range of products and the level of profits from sales of different products is also different. To achieve the maximum level of total return must concentrate all means and efforts on producing profitable products.
At the heart of decisions about inventory management firms and their production processes are elimination and innovation.
Elimination, ie removal of obsolete products from the market, the process is less researched and less used in the marketing practice than planning products. This is due to several reasons. Thus, in planning the initiative identifies products company elimination is often imposed by the market and is a result of its development. In addition, the "goodbye" with products, which has become customary, the company is much more difficult, including psychologically, than to launch a new one.
However, the withdrawal of products from the production and sales often becomes a necessity. Thus, if a company goes to market with new products, it should eliminate outdated, not to undermine its production program. In addition, the firms multifood most of the revenue comes mainly from the sale of a small range. The rest of the range provides a relatively small contribution to the overall results of the company. We must also take into account the fact that certain products complete their life cycle or due to changes in current legislation fall under the ban, which also needs to address them.
To make choices about removing the product from the market using the following criteria:
- The economic importance of the product for the company (shares in circulation, the amount of revenue from sales, profitability);
- Position the product on the market (market share, market potential, resistance to competing products);
- The level of loading product manufacturing and storage facilities of the company;
- Prospects for the product in the future (step life cycle, possible technological changes).
Based on these criteria determine optimal "candidate" for withdrawing from the production and withdrawal from the market. But it should be good to calculate the contribution to the overall result of the product of the company, as it helps to increase sales, penetration difficult competition in the branded business relationships.
The immediate withdrawal of the product from the market can be done the following methods:
1) "harvest" - a gradual reduction in production costs and sales and thus reduce the sales of old product for possible retention previous price;
2) "vydoyuvannya" - a sharp reduction in marketing costs to reduce overall costs and maintain profits in the final stages of the product life cycle;
3) focusing - all marketing efforts focus on the strongest and most attractive market segment with simultaneous output of all phases of sales in other segments;
4) strengthen the product line - the exclusion of certain items assortment of product lines, so concentrate resources on those items that are most favorable to the company;
5) exclusion product line - out companies from certain sectors of operation and focus its efforts on priority particularly promising and effective ways.
Updating products is carried out using processes of differentiation and diversification. Differentiation - a complement existing lines (nomenclature groups) products of new species. For example, the production of new models of TVs in addition to the existing range. Diversification - a supplement production program with new product lines. This distinction horizontal, vertical and lateral diversification.
Horizontal diversification - is added to the production program of new product types other related feasibility level. For example, add issue TVs VCRs.
Vertical diversification - a supplement production and technology program production higher or lower technical level. For example, the production of television sets complement the release of various electronic units to them.
Lateral diversification occurs when between existing and new products, there is no connection. For example, an enterprise that manufactures TVs, extends its business in the service sector (construction of hotels, restaurants and so on. P.) 1 or any other branch of production.
While management products always raises a number of issues to consider and resolve to achieve the desired result of the marketing activities of the company - to maximize profits. Among them are, for example, the following:
The rapid aging products. Any product in a few years no longer meets modern scientific and technical level or the wishes of consumers. Such aging may be purely technical (scientific and technological progress, product policy companies that offer market advanced types of products), physical (the result of prolonged use or operation of the product) or stylistic (the result of the transformation of consumer tastes). Accordingly, the planning of new products or elimination recognize the fundamental elements of the old market of any company.
However, we must remember that new products may cause a fatal blow old trade (this phenomenon is called "commodity cannibalism") In this regard should be avoided too many similarities between the existing and new products, effectively placing new products on the market (along with commodities competing firms and away from the company's own products, which could undesirably compete novelty).
It is also possible to use "deferred aging", ie making technical improvements only when reduced demand for existing products.
Undesirable effects of a large latitude, saturation, depth and harmonicity nomenclature. Too large variety of products can lead to a "spraying" the efforts of the firm, lack of attention to individual headings. In addition, the release of a complete set of products does not always ensure success, because too enhances competition, creates difficulties in marketing activity. The main tools to solve this problem is to use approaches and methods of marketing strategic planning.
Problems related to servicing customers with different income levels. Each company should focus on customers with a certain level of income, change in orientation is undesirable or is connected with great difficulties. So, serving customers with high income, the company gets prestigious image. In this case, it must comply with certain conditions, namely:
- New products the company is clearly different from the last;
- The buyer should be able to see and appreciate the difference;
-for product sales should use their own original channels of distribution, marketing system, typical for this type of companies;
- Products should be given special "brand" name.
Image prestigious firms should be there to keep that. After the transition to customer service with low incomes make difficult a return to previous positions. It will be possible only through a long and complex evolution.
The high level of risk by product innovations. In this connection, the scope of planning new products seen as particularly important to be close supervision and planning. However, we must remember that firms are trying to secure growth, using only its traditional products often fall into a brutal competition. Therefore, despite the risk of attempts to introduce to the market new products, with technical, aesthetic and qualitative advantages always advisable to seek at least temporarily be out of competition.
It should be added also the difficulty of proper selection of the optimal organizational structure of product range and nomenclature. There it forms shown in Table. 14.