The Law of Line Extension
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 product. The goal behind this strategy is to entice current customers with new products as well as expanding the company’s market to reach new customers (Anzalone, 2013).
Pros to Line Extensions
Line extensions are very attractive to companies for several reasons. The idea of expanding on the product that has proven to be successful is such a desirable concept that companies perceive these to be a low-cost, low-risk opportunity. Line extensions are frequently used as a short-term competitive edge over the competition. One company may have the ability to satisfy several needs of a single customer with a larger variety of products (Quelch, Kenny, 1994).
Consumers want to try out brands that they have never used before. There is a large market of consumers that can be enticed to try a new product from a company that they have not purchased from in the past. Line extensions can bring in new customers. Line extensions also help companies keep existing consumers by offering more of a variety of products in one location. Another benefit of line extensions is that they provide companies the opportunity to have a larger range of price points (Quelch & Kenny, 1994).
Companies choose to either add a new product to their inventory or to
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 product. The goal behind this strategy is to entice current customers with new products as well as expanding the company’s market to reach new customers (Anzalone, 2013).
Pros to Line Extensions
Line extensions are very attractive to companies for several reasons. The idea of expanding on the product that has proven to be successful is such a desirable concept that companies perceive these to be a low-cost, low-risk opportunity. Line extensions are frequently used as a short-term competitive edge over the competition. One company may have the ability to satisfy several needs of a single customer with a larger variety of products (Quelch, Kenny, 1994).
Consumers want to try out brands that they have never used before. There is a large market of consumers that can be enticed to try a new product from a company that they have not purchased from in the past. Line extensions can bring in new customers. Line extensions also help companies keep existing consumers by offering more of a variety of products in one location. Another benefit of line extensions is that they provide companies the opportunity to have a larger range of price points (Quelch & Kenny, 1994).
Companies choose to either add a new product to their inventory or to