Line Extensions occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes. This is as opposed to brand extension which is a new product in a totally different product category.Line extension occurs when the company lengthens its product line beyond its current range. The company can extend its product line down-market stretch, up-market stretch, or 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.
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 they invented entirely new names rather than using or including their own names.
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...