Product-Line Decisions
A product line can contain one product or hundreds of products. The number of products in a product line refer to its depth, while the number of separate product lines owned by a company is the product line width.
There are two overarching strategies that deal with product line coverage. With a full-line strategy the company will attempt to carry every conceivable product needed and wanted by the target customer. Few full-line manufacturers attempt to provide items for every conceivable market niche. Instead, they provide many products for a particular market segment.
Companies that employ a limited-line strategy will carry selected items. Limited-line manufacturers will add an item if the demand is great enough, but they make that decision based on the market opportunity for the product rather than on a desire to meet all customer needs with their product line.
Line-Extension Strategies
Line extension of Bon Ami
A line-extension strategy involves adding new products under an already established and well-known brand name. The objective is to serve different customer needs or market segments while taking advantage of the widespread name recognition of the original brand.[1]
For example, when Frito-Lay adds Dinamita Mojo Criollo Flavored Rolled Tortilla Chips to its Doritos line, that is a line-extension strategy. Frito-Lay is able to take advantage of a strong brand with existing shelf space and add a new product that has an appeal to shoppers seeking a spicier snack than the traditional nacho cheese flavor. Similarly, Clinique provides high-end skin care products and has extended its line to provide anti-acne products.
Generally, line-extension strategies are lower risk because they introduce a product change but are able to take advantage of other proven elements of the marketing mix. Still, there is a risk of cannibalizing the market for existing products or, if the product is not well received, damaging the brand. Also there a danger in overextending the product line by offering so many products that consumers can’t find unique value, and company resources get stretched across many, low-volume products.
Line-Filling Strategies
Line-filling strategies involve increasing the number of products in an existing product line to take advantage of marketplace gaps and to reduce competition. Many businesses use line filling to round out an already well-established product line and to help increase the market success of new related products.[2]
Before considering such a strategy several key questions should be answered:
- Can the new product support itself?
- Will it cannibalize existing products?
- Will existing outlets be willing to stock it?
- Will competitors fill the gap if we do not?
- What will happen if we do not act?
Assuming that a company decides to fill out the product line further, there are several ways of going about it. The following three are most common:
- Product proliferation: the introduction of new varieties of the initial product or products that are similar (e.g., a ketchup manufacturer introduces hickory-flavored and pizza-flavored barbecue sauces and a special hot dog sauce).
- Brand extension: strong brand preference allows the company to introduce the related product under the brand umbrella (e.g. Jell-O introduces pie filling and diet desserts under the Jell-O brand name).
- Private branding: producing and distributing a related product under the brand of a distributor or other producers (e.g., Firestone producing a less expensive tire for Costco).
In addition to the demand from consumers or pressure from competitors, there are other legitimate reasons to engage in these tactics. First, the additional products may have a greater appeal and serve a greater customer base than did the original product. Second, the additional product or brand can create excitement both for the manufacturer and distributor. Third, shelf space taken by the new product means it cannot be used by competitors. Finally, the danger of the original product becoming outmoded is hedged. Yet, there is serious risk that must be considered as well: unless there are markets for the proliferations that will expand the brand’s share, the newer forms will cannibalize the original product and depress profits.