Product Extension

Product Extension

Product Extension Jonathan Poland

Product extension is the practice of introducing new products or product lines that are related to a company’s existing products. This strategy can be used to diversify a company’s product offerings, reach new customer segments, and increase sales and revenue.

There are several types of product extension strategies that companies can use. Line extension involves introducing new products within the same product line, such as introducing new flavors or sizes of a food product. Brand extension involves using an existing brand name to introduce a new product in a different category, such as a clothing company launching a line of home goods. New product development involves creating entirely new products that are unrelated to the company’s existing offerings.

Product extension can be an effective way for companies to grow and expand their business, but it also carries some risks. It is important for companies to thoroughly research and assess the market demand for their new products, as well as their ability to effectively produce and distribute them. Introducing new products can also require significant investments in marketing and advertising to promote the products and build brand awareness.

Product extension can be a useful strategy for companies looking to diversify their product offerings and reach new customer segments. However, it is important for companies to carefully consider the market demand, production and distribution capabilities, and marketing and advertising efforts required to successfully launch new products. This has several common variations:

Changes in package size or format. For example, coffee that is sold in bags that is extended to the same product in a resealable can.

Additional flavors such as a line of organic fruit-only jams that adds a cherry jam to their product line.

Changes to product form such as a hardcover book that is released as a paperback.

Adding or subtracting features. For example, a smart thermostat that releases a product that is fully offline for customers who are concerned about privacy.

Adding or subtracting functions such as a gaming mouse that is released as a standard two button mouse for regular users.

Increasing or decreasing performance. For example, a manufacturer of high performance wifi routers that releases a low-end model for the consumer market.

Different styles and colors of the same product can be considered a product extension.

Product variations that have different ingredients such as an organic and non-organic version of a juice product.

Horizontal Extension
A horizontal extension is the release of a new product that has the same quality and price as existing products. This provides more variety to attempt to gain market share with stronger product differentiation.

Vertical Extension
Vertical extension is the release of new products at different levels of quality and price from your current offerings. For example, a resort that offers cheaper or more luxurious rooms.

Price Discrimination
Price discrimination is the process of trying to offer price sensitive customers a lower price and price insensitive customers increased quality or convenience. For example, a manufacturer of men’s belts that offers popular colors at a high price and unpopular colors at a low price such that customers who are willing to sacrifice color for price can save money.

Down-market Stretch
The release of new products designed to be more affordable, usually at reduced quality. For example, a luxury chocolatier that releases a line of packaged products with a relatively long shelf life for sales at grocery stores. This risks damaging brand image as luxury chocolate consumers will wonder why they are paying so much for a brand available at a grocery store.

Up-market Stretch
The release of premium versions of a product designed to appeal to customers who are willing to pay more. For example, a sunscreen brand that releases a product that is made with organic ingredients that are all perceived as healthy that have less impact on the environment at a much higher price than products in the line that use standard chemical ingredients commonly found in sunscreens.

Brand Extension
Brand extension is the use of a brand name on a completely different type of product. For example, a car manufacturer that releases a line of bicycles. This risks confusing your brand identity in the minds of customers.

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