May 212015
 

What is a product line?

A product line is a related set of products offered by a firm. For example, Apple offers computers, smart phones, tablets, MP3 players, smart watches, and online services. Each of these would be considered a separate product line and under each product line they could offer a broad range of different products designed for different needs.

Product development goals

Over time firms typically introduce new products and add them to their existing product lines. This product tactic is designed to keep their product line modern and competitive, adapt to changing market needs, and increase the number of products that they can sell to their existing target market.

One of the decisions that they need to make when introducing new products to an existing product line is whether or not to stretch the length of their product line.

Stretching the product line

Stretching the product line means taking it beyond the established positioning of the range of products.

Again if we use the Apple example above, in the mobile phone market Apple only offers smart phones of high quality. If they were to offer a basic smart phone they would be stretching their product line downward – that is, taking it beyond the standard offering and introducing types of products that would appeal to new parts of the market.

As another example, if Coca-Cola was to introduce some form of high quality gourmet soft drink that sold at very high prices, this would be also considered stretching the product line as they would be offering a premium product for the first time.

Ways to stretch the product line

There are three approaches to stretching the product line, namely:

  1. stretching downwards
  2. stretching upwards
  3. stretching both ways

Stretching downwards

A downward stretch of the product line is when a firm introduces lower quality products that they are normally associated with – such as the Apple example above.

Firms would engage in downward stretching of their product line for several reasons:

  • to block competitor activities and competitive product offerings
  • to compete in the budget end of the market, particularly if it is a high volume part of the market
  • to help broaden their brand’s positioning to be seen as a more affordable brand overall.

However there are significant dangers to downward stretching, particularly for a prestige brand, including:

  • product cannibalization of their higher-margin products
  • overall deterioration in their brand image
  • needing to support multiple products in the marketplace, or multiple positionings

Stretching upwards

An upward stretch of the product line is the opposite to the downward stretch. Here the firm introduces products that are of high quality as compared to the normal offerings – such as the Coca-Cola example above.

Firms often target high quality products and stretch their product line upwards because of several reasons, including:

  • high quality products often have a higher unit margin and can be quite profitable at a relatively low turnover
  • offering high-quality products helps position the overall brand towards being a status brand, which often enables price premiums to be charged across the full product line

The downsides of an upward stretch include:

  • The existing brand equity and image may not carry to the high-quality end of the market – and it may be necessary to introduce new brand names
  • Competitors already in the higher end of the market may look to defend their position
  • Additional or expanded distribution channels may be required to support high-quality products
  • The level of sales volume may not be sufficient, given that the turnover is generally less at this and the market

Both upward and downward stretching at the same time

Occasionally, firms may look to extend their product line both upwards and downwards – although this is generally rare and more likely in new/growth markets.

This would happen when firms are rapidly expanding their product line and trying to offer a full range of product offerings in order to reduce the incentive for new competitors. Therefore, the intention of this product line approach is to try and own/dominate the product category.

Product line filling

A more common approach to product line extensions is to introduce new products that are consistent with the brand’s initial positioning. So rather than expanding into the higher or lower quality end of the marketplace, the brand simply introduces more variations. This is common in fast-moving consumer goods where, snack foods in particular, have a variety of similar products.

The risk of overfilling the product line is product cannibalization, as well as the pressures on the manufacturing and logistics system and/or sales and service staff due to having too many products to manufacture and sell.