With all the variety you see on the shelves, extending a product line is often tempting. However, such an important business move should not be made without proper due diligence. So here’s what you need to know about product extensions and how to do them successfully.
What Is a Product Extension?
A product extension involves the expansion of an existing product within the same category. A product extension is a great way for brands to appeal to new customers and meet the needs of their existing customers. However, not all product extensions make sense, and many end up failing either because they don’t make sense or because they don’t actually appeal to consumers.
As a result, you need to be smart about pursuing product extensions for your brand. With the right creativity, research, and effort, you can develop a product extension that makes sense for your brand and for your existing customers.
How Does a Product Extension Differ From a Brand Extension?
If you’re new to the world of extensions, it’s quite easy to confuse a product extension with a brand extension. While a product extension involves expanding product offerings within the same category with new varieties, a brand extension involves expanding product offerings beyond the brand’s usual category.
A brand extension can open up a whole new category for a brand — if you do it right. Brand extensions are definitely a risky business venture since you’re doing something totally new. Brand extensions are more likely to be successful if you have the brand awareness and brand image needed to draw your existing customers into this new area.
There are different types of brand extensions that you may want to consider, including:
- Companion product extension: This brand extension occurs when a brand offers a complementary product that pairs well with its existing products.
- Customer franchise extension: This brand extension occurs when a brand uses its customer following to expand into completely different areas.
- Company expertise extension: This brand extension occurs when a brand uses its expertise within the subject area to expand into similar areas.
- Owned benefit extension: This brand extension occurs when a brand’s initial product is then expanded into different categories.
Pros and Cons of Product Extensions
Like any business venture, there are both pros and cons to pursuing a product extension.
The pros of product extensions include:
- Brands are able to cater to the wide range of needs held by their current customers. By expanding their product offerings, they are able to better cater to these needs and increase customer loyalty as a result.
- Brands are able to increase their shelf space in stores now that they are offering more product varieties. By increasing shelf space, brands are able to boost market reach and market share.
- Brands are able to save money on marketing for a product extension. This is because customers are already generally aware of the products, so there’s no need to start from scratch. Instead, you can simply promote the new varieties rather than educate customers about a completely different product line.
- Brands gain a leg up on their competition by serving their customers with a wide range of options that competitors may lack. As a result, customers will choose their products over the competitors’.
The cons of product extensions include:
- Brands may begin offering new varieties of products that don’t actually meet the needs of the customer. This is often due to a lack of research and can easily backfire if customers don’t want or buy the new product offerings.
- Brands tend to overspend on marketing for a product line extension. As a result, the product line extension needs to be incredibly successful to offset these high marketing costs.
- A bad product line extension could turn off existing customers and negatively impact brand loyalty.
- A bad product line extension could dilute the effectiveness and uniqueness of the product by offering too many unnecessary alternatives.
- Competing brands may then begin to also offer product line extensions in order to compete. This could completely saturate the market with too much variety and affect profits for everyone involved.
Examples of Good and Bad Product Extensions
When it comes to product line extensions, there are both good and bad examples. Good examples can exponentially grow a company and boost brand loyalty, whereas bad brand extensions can turn off customers and cause the company to lose money.
If you’re still not sure what a good extension versus a bad extension looks like, here are some examples of each to help guide you through the process:
Good product extensions include:
- A common example of a good product line extension relates to the different varieties of Coca-Cola. Coca-Cola has been able to expand the varieties of soda they offer to appeal to more customers. In addition to the classic Coca-Cola, they have a diet, zero sugar, cherry, vanilla, orange vanilla, and more.
- Another example of a good product line extension relates to Dove’s different varieties of personal care products. Dove offers scented body washes, unscented body washes, and body washes targeted towards men with more masculine scents. Customers are then able to choose their body wash based on what scents they like best.
- The last example of a good product line extension relates to Nissan’s line of compact cars. Nissan offered the Versa, Sentra, Altima, and Maxima sedans. They then expanded their product line with an electric car — the Nissan Leaf — to appeal to more customers concerned about the environment and ditch gasoline for good.
Bad product extensions include:
- One example is a line of low-fat french fries offered by Burger King. This extension was dubbed “Satisfries.” While it seems it would make sense, this product line extension failed due to a lack of education provided to consumers who had no idea what they were or why they should order them instead of regular fries.
- The second example of a bad product line extension relates to Pepsi’s line of clear soda. This extension was dubbed “Crystal Pepsi” and was designed to be a more pure and natural alternative to regular soda. Unfortunately, this product line extension failed because it essentially insulted Pepsi’s existing product line, making them seem “artificial” and “unhealthy.”
How to Launch a Successful Product Extension
A product line extension can be successful if you go about it the right way. Here are some tips that you can use to launch a successful product extension for your brand:
- Consider the performance of your existing products, including market growth, average order value, return on investment, and profits before expanding
- Ask your customers what they would like to see from your brand
- Consider moves being made to expand by your competition
Final Thoughts on Product Extensions
While a product line extension may seem like a surefire way to increase your market share and make more money, success is never guaranteed. Instead, you need to do enough research and due diligence before you begin to offer new product varieties.
Once you do decide to extend your products, you need to nail the marketing game. The best way to do this is to work with a marketing expert like Greg Gillman.
Sources:
What Is Product Extension in Marketing? | Small Business Chron
Line Extension vs. Brand Extension | Small Business Chron
The Logic of Product-Line Extensions | Harvard Business Review
