How Data Drives
a Successful Product
Mix Analysis

Julian Alvarado

Sr. Content Marketing Manager at Sigma

In a global economy, retailers have endless options for product offerings. How do you know which items will sell best? And how can you ensure the items you choose to include in your product mix deliver optimal profitability?

An effective product mix strategy, based on a robust product assortment analysis, depends on accurate, real-time data. You must track purchasing trends and stay on top of developments in everything from demand to supply chain issues. In this second post of a three-part series on retail merchandising, we look at how data fuels a successful product mix and how you can develop a strong product assortment strategy.

 Read Improve Your Upsells and Cross-Sells with Market Basket Analysis, the first post in this series, to learn how to overcome common MBA challenges.

What is Product Mix or Assortment?

Product mix, also called product assortment, describes the comprehensive set of products offered by a company. A product mix consists of various product lines and takes the following dimensions into consideration:

  • Width/breadth: the number of product lines offered
  • Length: the total number of products in the product mix
  • Depth: the number of variations within a product line
  • Consistency: how closely related product lines are to each other

What Does Product Mix Mean In Business?

Achieving the right product mix or assortment is the holy grail of retail. The right mix can help you build your brand, attract more customers, and encourage customers to buy more. Simultaneously, retailers face the pitfall of choice paralysis: If customers become overwhelmed with the variety of choices, they may avoid making a decision altogether. Here are three ways a strategic product mix can benefit your business.

Let’s look at the benefits of a strategic product mix and how to alleviate choice paralysis:

  • Your product mix shapes your brand image and the customers you attractYour product mix helps create customers’ perception of your brand. For example, if Neiman Marcus had many bargain brands in their product mix, they would likely lose their reputation as a luxury retailer. Clients looking for luxury goods would go elsewhere, and the company would, instead, be competing with retailers like Kohls.
  • Your product mix makes it easy for customers to buy Knowing your customers and nailing the right product mix is more important than ever in the age of online shopping. Customers come with precise demands and expectations, and they can easily pull up a new tab and load your competition’s website. Tailoring your product mix to your customers’ needs and desires will help you retain them.
  • Your product mix must help mitigate the paradox of choicePlenty of studies have demonstrated the paradox of choice: Customers insist on a range of choice and variety, but too many options will cause them to move on without making a decision. In one study, a display of 24 jams and jellies was put out on a store floor. While it attracted shoppers, only 3% converted. The next week, a display of only six jams and jellies was created. That display drew fewer shoppers, but 30% converted.

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Why Developing a Product Mix Strategy Is Challenging

To create the ideal product mix, you need to base your strategy on accurate, timely purchase data and insights into your customers’ needs and desires. You must also determine the practicality of various options and how profitable they’ll be.

Here are three key challenges to developing a product mix strategy and tips to overcome them:

Top-selling products aren’t necessarily the most profitable

Higher-ticket items aren’t always the biggest moneymakers. Margins, rate of sale, returns, and other factors must be taken into account. When determining which products should occupy the most shelf space, ask critical questions, such as:

  • Which products drive the most loyalty or repeat purchases over time?
  • How much does it cost to acquire the customers that purchase these products?
  • What are our margins on these products or this product line?

Static dashboards and traditional spreadsheets are insufficient

The sheer scale of a product mix creates challenges. With dozens or even hundreds of products in a product line, multiple variations of each item, and numerous product lines, you must have the ability to get granular with your analyses.

Due to row limitations, it’s nearly impossible to perform a product mix analysis in traditional spreadsheets. And standard dashboards provided by your BI team won’t let you drill into that level of detail either. Instead, look for an analytics tool that allows business users (without advanced coding skills) to dive into the data in detail for themselves using a familiar interface.

Supply chains can be interrupted

Another essential factor you should consider in your product mix is supply chain. Disruptions like bad weather, material shortages, regional conflicts, etc., can affect supply chains and restrict certain products’ availability. It’s smart to draw up multiple contingencies to address any disruptions to supply.

Tips for Conducting an Effective Product Mix Analysis

To see the benefits of a successful product mix, you must conduct an effective product mix analysis. Here are three tips that will help your analysis be successful.


Target segment analysis can help you determine which groups of customers generate the highest monetary value over the length of the relationship. Analyzing their transactions can reveal which products they have an affinity for, which they purchase more frequently, and other insights.

Read Target Your Highest Value Prospects for Maximum ROI to see a step-by-step process for doing target segment analysis.


As we mentioned above, it’s crucial to go beyond the overarching metrics and get a detailed view. You must dig into sales by product line to examine performance by particular SKUs, splice that data by region, etc. Check with your BI team to make sure all your data is in their cloud data platform, and then use an analytics tool built to harness the unlimited speed and scale of that platform.


Because creating a strong product mix strategy relies on data, developing the attitude of a data explorer is invaluable. Commit to asking questions and digging into data to get the answers you need for creative solutions for your product mix and placement. Invite the challenge of rapid, iterative analysis. With analytics tools that empower you to independently explore data and get answers to your questions in real-time, this process is simple.

Product Mix Analysis Example

Trader Joe’s is an excellent example of a company doing product mix analysis right. First, Trader Joe’s looked at data to discover that people between the ages of 18 to mid-40’s spend more on groceries than their counterparts in other age groups.

Next, the company examined the data around the needs and desires of this target customer and found that they tend to eat locally and are more conscious about their food. They want quality at a high value. But they don’t care about brand names.

With this information, Trader Joe’s built a product mix focused on specialty foods that are organic and natural under their own brand name so they can offer more attractive prices. And it’s working. According to a recent report by JLL, Trader Joe’s sells an average of $1,734 per square foot, compared with Whole Foods’ average of $930 per square foot.

Data Delivers Power To a Product Mix

Retailers that take advantage of data to develop their product mix can identify which customer segments to focus on, what products will be most attractive to them, and which products will be most profitable. With the power of a cloud-native, intuitive data analytics platform that allows you to explore data in detail, you can get the insights you need for a successful product mix.

For more on product mix and other strategies retailers can use to improve profitability, read How Data Analytics Empowers Retail Merchandisers to Thrive Through Disruption.

And to learn more about how Sigma empowers leading retailers to maximize revenue by influencing every stage of the buyer journey visit our Sigma for retail page.  

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