Product range policy
The term range policy is the common for commercial enterprises equivalent for the applicable Herstellunternehmen term product policy and an essential action item of trade marketing . The range denotes the entire range of goods and services offered by a trading company .
We understand the term “product range policy” to be the summary term for all decisions made by a retail company about the optimal design of its overall range of goods, goods and services.
With the help of the range policy
- the range of services can be extended (to include goods and / or services produced by others or in-house)
- new products can be added to the range
- the assortment can be adjusted to include individual articles (e.g. "slow movers")
- the range can be reproduced
Objectives of the range policy
Assortment policy (product policy, for example in the case of private labels) is the measure of a trading company to design its entire range in line with the market in order to achieve the goals of trade marketing:
- Increase in profit and / or sales
- Reduction of costs
- Improvement of the competitive situation
- Spread of Risks
- Utilization and possibly rationalization of production and storage
- Increase in joint purchases and sales volumes
- Positioning in the market and against competitors
- Optimization of the assortment arrangement in the sales room (customer run)
The following design principles offer starting points for creating assortment units:
- Origin orientation (material / substance orientation as well as supplier orientation)
- Price orientation
- Orientation towards the self-sale of the goods
- Orientation towards company-related structural aspects
- Orientation towards the consumer-oriented behavior of manufacturers (pre-sold branded articles, market development and maintenance)
- Orientation towards competitors (withdrawal, adjustment or avoidance of competition through mutual coordination)
- Needs orientation (types / areas of need, areas of experience / occasions for use, consumers or target groups)
Based on Schenk (Psychologie im Handel, 2nd edition, Munich / Vienna 2007), the retailer's assortment policy can be implemented through numerous measures to modify the assortment, including those of a psychotactic and strategic nature:
- Consistency of the range (at product group level ): This alternative does not represent an active market adjustment to changed consumer behavior or market influence and is therefore only applicable to a limited extent.
- Assortment contraction : This represents an elimination of goods or article groups, whereby one can speak of a real assortment contraction if the elimination is not compensated by corresponding expansions in other goods groups:
- Elimination of product groups
- Restriction of goods or article groups
Problem: An "involuntary" restriction of the range width can occur, for example with isolated article orientation based on ranges, contribution margins or turnover rates. If, for example, article B has a higher contribution margin than article A and the latter is only displaced for reasons of cost calculation, a conflict of goals arises between cost and marketing-oriented interest (e.g. in a certain range of products). If one item displaces another in this way to the detriment of the entire range profile, this is called cannibalization .
- Range differentiation : Based on the industrial sector, a range differentiation can be used to describe the addition and / or completion of previously offered product groups with supplementary article groups or services with the aim of creating alternative purchase options. In addition, a distinction can be made between subject and time range differentiation.
- Range diversification : It represents an expansion of the range to include new, different sub-areas with the aim of creating additive purchase opportunities .
- Range variation : The range of products is not changed here, but individual product groups are accentuated by changing their structure. Today we speak of an active or customer-oriented product range policy. The focus is on the customer, their needs and their coverage by the dealers in the vicinity. The active or customer-oriented product range policy offers the products that are currently of interest to the customer frequency.
- Assortment innovation : the development / compilation is understood by new assortments of products and product groups incorporating services as assortment innovation. A distinction must be made here according to the degree of novelty:
Operational steering and control
- Sales power as an indicator of article acceptance:
- Sales power : multiplicative linking of the item-related sales volume in your own company with the average asking price
- Trade margin as sales minus the cost of goods
- Turnover rate : sales / inventory
- Gross profitability force (gross benefit digit): surcharge margin in% * Turnover
- Net profitability ( contribution margin )
- Compensation power : net profitability * 100 / net profitability of the product group
- Direct product profitability (DPR): Sales minus cost of goods purchased minus item-specific handling costs