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Product Line Decisions

13 May, 2016 - 13:23

A product line can contain one product or hundreds. The number of products in a product line refers to its depth, while the number of separate product lines owned by a company is the product line width. Several decisions are related to the product line.

There are two basic strategies that deal with whether the company will attempt to carry every conceivable product needed and wanted by the consumer or whether they will carry selected items. The former is a full-line strategy while the latter is called a limited-line strategy. Few full-line manufacturers attempt to provide items for every conceivable market niche. Few limited-line manufacturers would refuse to add an item if the demand were great enough. Each strategy has its advantages and disadvantages.

Line extensions strategies involve adding goods related to the initial product, whose purchase or use is keyed to the product. For example, a computer company may provide an extensive selection of software to be used with its primary hardware. This strategy not only increases sales volume, it also strengthens the manufacturer's name, strengthens the association with the owner of the basic equipment, and offers dealers a broader line. These added items tend to be similar to existing brands with no innovations. They also have certain risks. Often the company may not have a high level of expertise either producing or marketing these related products. Excessive costs, inferior products, and the loss of goodwill with distributors and customers are all possible deleterious outcomes. There is also a strong possibility that such a product decision could create conflict within the channel of distribution. In the computer example just described, this company may have entered the software business over the strong objection of their long-term supplier of software. If their venture into the software business fails, re- establishing a positive relationship with this supplier could be quite difficult.

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.

Line-filling strategies occur when a void in the existing product line has not been filled or a new void has developed due to the activities of competitors or the request of consumers. 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 we decide to fill out our product line further, there are several ways of implementing this decision. 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 Kmart).

In addition to the demand of consumers or pressures 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.

Line-pruning strategies involve the process of getting rid of products that no longer contribute to company profits. A simple fact of marketing is that sooner or later a product will decline in demand and require pruning. Timex has stopped selling home computers. Hallmark has stopped selling talking cards.

A great many of the components used in the latest automobile have replaced far more expensive parts, due to the increased costs in other areas of the process, e.g. labor costs. Using modern robotics technology has halved the manufacturing costs of several products. Through such implementation, Keebler Cookies moved from packaging their cookies totally by hand to 70 per cent automation. Other possible ways a company might become more efficient are by replacing antiquated machinery, moving production closer to the point of sale, subcontracting out part of the manufacturing process, or hiring more productive employees.