Managing Existing Products

When to Extend Product Lines

A company can extend its product line using a down-market stretch, an up-market stretch, or a move both ways.

Learning Objectives

Describe the nature of a product line extension

Key Takeaways

Key Points

  • A line extension should only be considered when the producer can profitably produce a product that compares well with the base product.
  • Changing market environmental factors often indicate when the timing suites a product line extension.
  • The environmental cues help organizations determine if they should stretch down-market, up-market, or both ways.

Key Terms

  • product line: A product line is the marketing strategy of offering several related products for sale as individual units.

Introduction

A product line extension is the use of an established product’s brand name for a new item in the same product platform. Thus, line extension occurs when the company lengthens its product line beyond its current range. The company can extend its product line with a down-market stretch, an up-market stretch, or a move both ways.

Down-Market Stretch

A company positioned in the middle market may want to introduce a lower-priced line for any of the three reasons:

  1. The company may notice strong growth opportunities as mass retailers such as Wal-Mart, Best Buy, and others attract a growing number of shoppers who want value-priced goods;
  2. The company may wish to tie up lower-end competitors who might otherwise try to move up-market. If the company has been attacked by a low-end competitor, it often decides to counterattack by entering the low end of the market;
  3. The company may find that the middle market is stagnating or declining.

Up-Market Stretch

Companies may wish to enter the high end of the market for more growth, higher margins, or simply to position themselves as full-line manufacturers. Many markets have spawned surprising upscale segments:

  • Starbucks in coffee;
  • Haagen-Dazs in ice cream; and
  • Evian in bottled water.

Leading Japanese auto companies have each introduced an upscale automobile:

  • Toyota’s Lexus;
  • Nissan’s Infiniti; and
  • Honda’s Acura.

Note that the companies invented entirely new names rather than using or including their own names

Two-Way Stretch

Companies serving the middle market might decide to stretch their line in both directions. Texas Instruments (TI) introduced its first calculators in the medium-price-medium-quality end of the market. Gradually, it added calculators at the lower end taking the share from Bowmar, and at the higher end to compete with Hewlett-Packard. This two-way stretch won Texas Instruments (TI) an early market leadership in the hand-calculator market.

Examples include:

Different varieties of Coke - regular Coke, Vanilla Coke, Cherry Coke, and Coke Zero Vanilla.

Take Your Pick: Coca-Cola’s product line offers a variety of Coke flavors.

  • Zen LXI, Zen VXI;
  • Surf, Surf Excel, Surf Excel Blue;
  • Splendour, Splendour Plus;
  • Coca-Cola, Diet Coke, Vanilla Coke;
  • Clinic All Clear, Clinic Plus; and
  • Reese’s Peanut Butter Cups, Reese’s Pieces and Reese’s Puff Cereal.

A line extension strategy should only be considered when the producer is certain that the capability exists to efficiently manufacture a product that compares well with the base product. The producer should also be sure of profitable competition in this new market.

When to Modify Products

While the decision to modify products happens ideally at the design stage, products can be changed during any phase of the life cycle.

Learning Objectives

Name the external factors that can influence product development

Key Takeaways

Key Points

  • Products are modified to compete more effectively in the market, and appeal to evolving consumer and business demands.
  • Multiple stakeholders ranging from employees and customers can influence product modifications.
  • Product time, cost, visual appeal, usability and reliability are all factors that influence how and when a product is modified.
  • External influences often prompt manufacturers to modify products. These are usually driven by competitive pressures, globalization, new technologies, or unexpected and significant events.

Key Terms

  • iterative: Of a procedure that involves repetition of steps (iteration) to achieve the desired outcome; in computing this may involve a mechanism such as a loop.
  • recall: To withdraw, retract (one’s words etc. ); to revoke (an order).
  • modified rebuy: the repurchase of a good with changes to the details of the order
  • stakeholders: A person or organization with a legitimate interest in a given situation, action or enterprise. It can range from employees and investors of a company to the customers purchasing from the company.

When to Modify Products

The product life cycle (PLC) encompasses the multiple phases products pass through during their ‘life’ in the market. Products travel through market introduction, growth, maturity, saturation and decline, posing different challenges, opportunities and problems to manufacturers and sellers depending on industry and target audience. At some point during the life cycle, products may be modified to compete more effectively in the market, and appeal to evolving consumer and business demand.

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Phases in the Product Life Cycle: Modification decisions often (but not always) happen before products are introduced to the market.

Product Design Stage

At the design stage, developers and engineers must assess the importance of various requirements from a wide range sources. Stakeholders typically contribute input during product development, demanding something different from the product designer and design process.

Factors that can influence whether products are modified at the design stage include:

  • Overall production time and cost
  • Price, appearance, and prestige value
  • Usability and functionality
  • Assembly and reliability

Stakeholders’ needs vary from one another and it is the product designer’s job to incorporate those needs into their design. Product design is an iterative process, and often needs to be modified due to manufacturing constraints or conflicting requirements. Where a customer order fits into the timeline depends on the industry type and whether the products are for example, built to order, engineered to order, or assembled to order.

Market Influences

Although product manufacturers painstakingly consider numerous details and possibilities of what could go wrong, many new designs ultimately fail or become obsolete. These product failures usually go back to the manufacturer for modifications, and are later re-introduced to the market. Other products are never re-introduced and deleted entirely from the product roadmap. Product development can take as many as five to six attempts before achieving success in the marketplace.

Innovation provides much of the competitive impetus for the development of new products, with new technology often requiring a new design interpretation. It only takes one manufacturer to create a new product paradigm to force the rest of the industry to catch up, fueling further innovation. While some products are completely new innovations, others are simply minor modifications to existing products.

New and rapidly changing technologies, evolving trends, increased demand and globalization are all factors that play into the decision to add product features and functionality. Unpredictable forces such as mass contamination can lead to product recalls, and the modification or destruction of large quantities of products. In 2007, millions of toys manufactured in China were recalled due to discoveries of lead paint and fears of lead poisoning in children. Product recalls, which can happen at any stage of a product life cycle, are costly and can severely damage a brand ‘s reputation if managed poorly.