What Is Product Variety?
Product variety refers to the range of distinct goods or services a company offers to its customer base within a specific market or across different markets. As a core element of business strategy, it directly influences a company's ability to cater to diverse consumer preferences, capture greater market share, and foster competitive advantage. A strategic approach to product variety can enhance overall diversification by broadening a firm's appeal and spreading its market presence.
History and Origin
The concept of offering a variety of products evolved significantly with the advent of mass production in the 20th century. Before this, production was largely artisanal, limiting the range of goods available to consumers. As manufacturing capabilities advanced and economies of scale became achievable, businesses began to explore the benefits of extending their product lines. This shift allowed companies to serve a broader spectrum of needs and tastes, moving beyond a "one size fits all" approach. The evolution of product design, from basic functionality to diverse forms and features, reflects this historical progression towards greater consumer choice.4
Key Takeaways
- Product variety is the assortment of goods or services a company provides.
- It aims to satisfy diverse consumer preferences and expand market reach.
- Strategic product variety can enhance revenue, competitive positioning, and resilience.
- Excessive product variety can lead to increased operational costs and potential consumer overload.
- Balancing product variety requires thorough market research and an understanding of consumer behavior.
Interpreting Product Variety
Interpreting product variety involves assessing both its breadth and depth. Breadth refers to the number of different product categories a company operates in, while depth refers to the number of distinct items within a single product category or line. A broad product variety might mean a company offers electronics, apparel, and home goods. A deep product variety, conversely, would involve many models, sizes, or colors of a single product, such as a wide range of smartphones. The optimal level of product variety for a firm depends on its target market, cost structure, and overall business objectives.
Hypothetical Example
Consider "BlendMaster Kitchenware," a hypothetical company that initially sold only one type of blenders. To increase its product variety, BlendMaster decides to expand its offerings.
Step 1: Assessing Market Needs
BlendMaster conducts market research and identifies consumer demand for different blender types: personal blenders for smoothies on the go, high-power blenders for complex food preparation, and immersion blenders for soups.
Step 2: Expanding Product Lines
Based on the research, BlendMaster introduces:
- The "BlendMaster Go" (personal blender)
- The "BlendMaster Pro" (high-power blender)
- The "BlendMaster Stick" (immersion blender)
Step 3: Deepening Variety within Lines
Within the "BlendMaster Go" line, the company adds color options (red, blue, silver) and different cup sizes (16 oz, 24 oz). For the "BlendMaster Pro," they introduce models with varying motor wattages and pre-programmed settings. This expansion of product variety allows BlendMaster to capture new revenue streams by appealing to a wider range of customers with specific needs, from busy commuters to professional chefs.
Practical Applications
Product variety is a pervasive concept across numerous industries and business functions. In retail, it dictates the assortment of goods available on shelves or online, influencing customer choice and store traffic. Manufacturing firms leverage product variety to utilize production capacity, extend product lifecycles, and achieve efficiencies through shared components or processes across different product lines. For instance, a major appliance manufacturer might offer refrigerators in various sizes, colors, and feature sets to meet diverse consumer demands, while often sharing underlying supply chain and innovation components.
Moreover, product variety intersects with regulatory compliance. Companies must ensure that all products offered adhere to relevant safety, environmental, and labeling standards in each jurisdiction where they are sold. Product Compliance and Toxins Regulations often dictate specific requirements for chemicals, materials, and performance, adding a layer of complexity to managing a broad product portfolio.3 This regulatory landscape necessitates careful risk management to avoid penalties, recalls, and reputational damage.
Limitations and Criticisms
While product variety can offer significant advantages, it is not without drawbacks. A primary concern is the potential for "choice overload," where consumers faced with too many options become overwhelmed, leading to indecision or even dissatisfaction with their purchase. Research from Harvard Business School suggests that sometimes, offering too many choices can prompt confused customers to defer a purchase or seek simpler alternatives.2
From an operational perspective, increasing product variety often leads to higher complexity throughout the supply chain, including procurement, inventory management, and distribution. This can result in increased cost structure, reduced profit margins, and diminished operational efficiency. An academic study on the impact of product variety on operations and sales performance found that beyond a certain threshold, increased variety can actually lead to lower sales due to operational inefficiencies and diminished fill rates.1 Furthermore, managing a vast array of products can dilute branding efforts and complicate marketing messages, making it harder for a company to establish a clear identity.
Product Variety vs. Product Differentiation
Product variety and product differentiation are related but distinct concepts in business strategy. Product variety refers to the sheer number and range of different items a company offers. It focuses on quantity and scope, aiming to cover a wider array of needs or market segments. For example, a car manufacturer offering sedans, SUVs, trucks, and electric vehicles demonstrates product variety.
In contrast, product differentiation focuses on making a product unique and more appealing than competitors' offerings. It emphasizes quality, features, design, or perceived value, aiming to create a distinct identity that justifies a premium price or builds strong customer loyalty. A car manufacturer might differentiate a specific SUV model by offering superior fuel efficiency, advanced safety features, or a luxury interior that sets it apart from other SUVs. While variety is about offering more choices, differentiation is about making each choice stand out. Companies often pursue both strategies, creating a wide range of products, each with its own unique differentiators.
FAQs
What is the main goal of increasing product variety?
The main goal of increasing product variety is to cater to a broader range of customer needs and preferences, expand market reach, and potentially increase sales and revenue streams. It allows a company to serve different segments of its target market more effectively.
Can too much product variety be a bad thing?
Yes, too much product variety can lead to negative consequences such as "choice overload" for consumers, making decision-making difficult. It can also increase operational complexities and costs for the company, impacting profit margins and potentially diluting the brand message.
How does product variety affect a company's costs?
Increasing product variety typically increases a company's costs. This can stem from higher manufacturing complexity, increased inventory holding costs, more complicated supply chain management, and additional marketing expenses required to promote a wider range of items.
Is product variety the same as diversification?
Product variety is a component of overall business diversification, but not the entirety of it. Product variety specifically refers to the range of goods or services offered. Diversification is a broader strategic concept that can also include expanding into new markets, industries, or technologies to spread risk and foster growth.