2018-03-07 13:45:34 Growing a Business English Introduce product line extensions to boost sales, gain market share, and enhance your company's image. Product line extension is a method... https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2018/03/managers-review-product-extension-growth-plan.jpg https://quickbooks.intuit.com/ca/resources/growing-business/renewing-growth-product-extensions/ Grow Your Sales With Product Line Extensions

Grow Your Sales With Product Line Extensions

4 min read

You know from experience that it takes a mountain of work to get people recognize your brand. Once your brand’s a household name, where to do you go from there? If you’ve built a strong brand, product line extensions are what you need to sustain and grow your business. Let’s get into how you go about extending your product lines.

Product Line Extension Explained

Tim’s at home is a perfect example of a product line extension. Tons of people already love Tim Hortons restaurant for its fresh brewed coffee by the cup. So, the company introduced bagged coffee beans, using the same familiar brand, that you can buy and brew yourself. Here, both people who buy their daily cup of coffee from Tim Hortons and people who don’t can buy this well-established brand at their local supermarket. You can introduce product line extensions by changing various aspects of a best-selling product, such as flavour, ingredients and package sizes. People already know you brand, so you don’t have to spend a lot of money on marketing.

Offering More Choices Pays

Think of your brand as a top-rated TV series. People keep watching, or in this case buying, because there’s something new to see and experience. Companies that use product line extensions usually see a boost in demand, sales, and market share. New choices keep customers interested, which keeps them coming back and makes them more loyal to your brand. The more choices you give your customers, the more likely they are to buy from you and recommend your products to their friends and family.

Some food for thought: Your retail customers actually want you to extend your product lines, especially when your brand’s selling well. If you sell a loved brand of lavender-scented liquid soap, of course retailers want the mint version. Extending your product line can help you get more shelf space, which makes you more visible to shoppers. Here’s the fun part: having product extensions on store shelves even gives your competitors a run for the money.

Another great thing about product line extensions is that you already have the necessary production processes and capacity. Continuing the scented liquid soap example, you wouldn’t have to invest as much as you would to offer a new scent as you would to create an entirely new line of products.

Beating the Product Life Cycle Cuts Costs

Most products have a four-stage life cycle: introduction, growth, maturity, and decline. During the introduction stage, you develop new products and bring them to the market. It takes a lot of time and money, and there’s a great deal or risk. Even if some people like your products right off the bat, you’ve got to pay all that overhead until they catch on with your wider target market. During the maturity stage of the product life cycle, the strong sales growth you see during the growth stage taper off. Your products have saturated the market, meaning that everyone who wants them already has them. Your marketing budget actually goes up to get the same sales.

With product line extensions, you skip the introduction stage and go straight to the growth stage. Your product development costs are mostly behind you and you already know how and to whom to market. As Tim Hortons understood when creating Tim’s at home, you start with a built-in customer base — that you already spent money and energy to acquire — chomping at the bit to try out new variations of products they already know and love.

And Now… the Potential Downside

As with everything in life, there are some pitfalls to product line extensions. If you introduce inferior versions of your products to appeal to more cost-conscious customers, it could hurt your brand’s image. Here’s an example of what you may not want: People once thought of Calvin Klein as a high-end, high-quality clothing brand. The company could sell its products at lofty prices while profiting from high margins. Eventually though, the company diluted its brand by introducing low-cost goods to appeal to budget shoppers. Today you can find Calvin Klein items at discount chain stores. In short, you could lose some of your loyal customers if your product line extensions are inconsistent with your brand’s existing image.

Choosing Products to Add

Market research is a good place to start. Spending any amount of time and money on products people aren’t interested in is a wasted effort. Ideally, you want to add products to your lines that people really want that don’t steal your popular products’ thunder.

The best way to conduct this type of market research is to listen to your customers. What do they like? What do they want to see more of? Think about simple ways to find out these things such as placing comment cards at points-of-sale, or even offering discounts or incentives to customers who give you feedback about your products. Consider using social media for market research to get more insight about the products your customers would like you to offer.

What’s cool about product line extensions is that they give your existing customers more choices. They also introduce new customers to your brand. Both of these things boost revenue and your competitive edge, and give your brand longevity.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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