The Law of Line Extension
Definition
The Law of Line Extension has been created with the belief that a company should not overextend themselves to the point that they want to encompass an entire market of many different products at the cost of losing their market share.
Many companies are able to rise to the top of their market to become first in class for their product. There are times when a product or the company that has created and established a first in class product begins to achieve a steady market share. At this point in time, many companies have decided to take advantage of their success and expand their existing product line to enhance a new market. One example would be for Coke to begin selling a new flavor of their
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(Anzalone, 2013).
Each new line extension needs to have a strategic plan for distribution and sales. Companies must remember that just because they have created a new product does not guarantee that all stores will be inclined to carry this product. There may be fifty types of the same product but store shelves have only been allotted for a possible twenty. Line extensions do not always increase the category demand, and the profits gained from line extensions are normally short-lived. Quelch and Kenny (1994) states “ Line extension proliferation spreads sales across more items, reducing retailers’ average turnover rate, and putting previously profitable SKUs at risk”.
Another risk of line extensions is cannibalizing your existing products. Companies should be aware of this risk and take precautions to avoid cannibalizing their existing successful product.
Minimalizing the Risks
Anzalone (2013) states that you can reduce the risk of failure of a line extension failing by accurate cost accounting, “allocating resources to popular products, research consumer behavior, coordinate marketing efforts, work with channel partners, and foster a climate in which product-line deletions are supported”.
Creating different sales strategies is important to the life of a brand or product. Sampling of a product can be an excellent way of marketing not only the new product, but
ii) Marketing strategies can be segmented into different types of clients. This increases efficiency and reduces costs.
After identifying the product(s) with the high sales, we will expand the capacity of that product(s). For the second round, we will analyze and adjust the automation levels to improve margins.
4. Expanding the company's product line to meet a broader range of customer needs The company may gain advantage on investing in a different product line. Facing new competitors would be a challenge on the part of the company. There might be opportunities waiting for the company. It is also an additional income for the company if it becomes successful. And to meet the needs of the customers by providing new products would lead to an aggressive and healthy competition. It also helps build the economy of the country if there is new development in companies. And it also leads to high employment because there's a need to hire more employees to implement the new business activities.
The company has recently decided to expand its product line to include a product that is a deviation from our traditional offerings. The expansion presents two potential outcomes. Outcome one has a potential for profit, incremental growth, and additional market share for the company. Outcome two has a potential for financial loss, reputation or brand damage and reduced market share.
Like any retail business, Finish Line must create a marketing mix using the four elements in order to develop their marketing strategy and tactics.
17. The marked increase in product offerings, which allows for more customer choice, creates logistical challenges in terms of identification, storage and tracking. Another interface involves the amount of particular SKUs to hold. Marketers often prefer to carry higher quantities of particular items because this reduces the likelihood of stockouts. Product design is often the purview of marketers and can also have important implications for logistical effectiveness and efficiency.
Take a look at the examples provided by Apple – the company is the most successful at the products they have already created, with their “cash cow” or most profitable product being the iPhone. Thus, if you worked for Apple, you would look at your consumer base and discover how to upsell them on better, more improved Apple products. This, of course, could leave you vulnerable to potential disruptors if you fail to take into account or ignore niche markets, but, in my opinion, people really just want the best product. They want quality, innovation, and superiority – if your company offers the best improvements incrementally in ways that customers expect – e.g., fuel injection – you can improve your product in your current market and succeed against your competitors. If you create an unexpected innovation to your product, such as with the automobile, the iPhone 6S, and the Macbook Pro with Retina Display, you can radically keep your clients’ interest while increasing your market share with continued
Being able to acquire a new market may bring those new customers to their current market.
By the fifth year, expand our market segmentation (Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate marketing strategies or mixes. Chapter 7) by offering products to the
It had been determined that the future success of Finish Line is closely tied to the integrity and premium value of the brand names that it represents (Source 1). 2004 also brought forth the planning of 60 new stores and 25 store remodels. A revised multi-channel sales approach has been developed emphasizing three components: the Internet (finishline.com), Finish Line Magalog, and the 531 Store Locations for Direct-to-Consumer Sales.
* To shorten its product line by removing some items that were not yielding much profit
Major costs related to creating resorbables, with risk of improving profits by only a little bit
Products are strategic separated placed in different sections such as Beauty Section, Groceries, Health and Pharmacy, etc.
The biggest challenge we find ourselves with is the sales towards the end of the year. In 2015 we had a little trouble getting rid of the clothing lines from that year to make room for the stores new lines in 2016. A change the staff will be making is seasonal clothing sales on sweatpants, sweatshirts, jackets, mittens and hats when spring time comes around. This is so customer feel an impulse buy when they see the sale and come back the following year for the new clothing line as well.
Entrants erode the market and rarely grow it enough to the incumbent’s advantage. New entrants have an impact on the industry business but at a moderate level. This is mainly because new firms will find it difficult to compete against the incumbents’ strong brand, like Starbucks and McDonalds, and because the market is saturated. However, the costs of entry are relatively low. Most of the raw materials are cheap and the distribution chain is not complicated. This makes it easy for new companies to enter the market. Also, established companies might leverage their brands as they enter the industry to compete against the incumbents.