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What is mix management?
We define mix management as selling the right product, in the right place, to drive optimal profit and growth. As a field within revenue management, mix is unique in maintaining importance regardless of market maturity – from developing to developed markets, it is always beneficial to consider the product portfolio and channel variation.
Why is mix management so critical now?
The 2021 financial outlook
Next year’s financial outlook has a number of implications for mix management. Consumers will become more price-sensitive and as a result, value proposition becomes paramount, and brands will look to range rationalisation strategies and putting value options at the forefront in order to adapt.
However, while range reduction and value options can be useful, consumers still want to purchase their favourite brands, formats, and pack sizes. Without proper analysis, stripping back the product mix is risky, and manufacturers need to be wary of keeping shoppers loyal to brands and working with the retailer for the best possible outcome. Through detailed analysis of product portfolios and channel agnostic pack solutions, brands can avoid losing loyal consumers whilst gaining efficiencies.
The growth of e-commerce
Whilst e-commerce cannot be considered ‘new’, its growth has notably accelerated since the beginning of the pandemic. As physical restrictions and health risks came hand-in-hand with in-store shopping, a new demographic began shopping online.
This year, the channel has grown in popularity by 10% with the consensus being that the majority of these shoppers won't be returning to in-store channels any time soon. Manufacturers need to adjust their product portfolios to suit online, with consumers often expecting bigger and more varied ranges. Secondary/tertiary brands and unusual pack formats as part of more varied ranges may propose smaller margins, so it’s worth analysing carefully whether it’s worth them staying part of your online offering.
The resurgence of the weekly shop
As consumers shopping in-store have tried to decrease their trips, basket size has increased with this decrease in shopping frequency. Essentially, consumers have changed gear away from convenience shopping and back to the more traditional weekly-shop routine. As a result, manufacturers can adapt by offering bigger pack formats rather than on-the-go varieties.
Changing consumer behaviour
As outside-the-home occasions have been restricted significantly, consumers have turned to alternative ranges in the supermarkets to fill this void. Closures of restaurants and bars has resulted in a small growth in premium, whereby the average price per product is up 4% and time on promotion has decreased by 11%. To react, brands can look to add premium products to their portfolios.
So, how can we use mix management now?
Mix management can be a powerful lever for brands when needing to adapt. The industry has seen a number of trends in the last year as a result of the pandemic, but perhaps it is most important to look ahead and bear in mind the financial outlook for 2021.
Strategies to employ include focusing on a strong value proposition, analysing ranges carefully, and including value packs if possible. Introducing channel agnostic pack solutions and amending pack sizes to fit the growth of new channels is also a key aspect of tailoring your product portfolios. When approaching mix management, see this as an opportunity for growth and optimisation of strategy rather than an optional exercise, particularly in the retail landscape we are currently living in.