29 March 2014

why product extension

Line extension and brand extension address the marketing of commercial goods. The brand refers to the recognized product or company name such as Kraft, Pepsi or Apple. The way in which the company expands its inventory determines line extension vs. brand extension.
Line Extension
Line extension refers to the expansion of an existing product line. For instance, a soft drink manufacturer might introduce a "Diet" or "Cherry" variety to its cola line, while a toy manufacturer might introduce new characters or accessories in its line of action figures. In short, line extension adds variety to its existing product for the sake of reaching a more diverse customer base and enticing existing customers with new options.
Brand Extension
Brand extension refers to the expansion of the brand itself into new territories or markets. For instance, if a soft drink manufacturer unveils a line of juices or bottled water products under its company name, this would constitute an example of brand extension. The brand, or company, is an established name, and so the name alone can serve to drive customers to try new products completely unrelated to the older product lines.
A line extension can reinvigorate a product line, bringing it back into the public awareness by drawing new customers and higher profits. A brand extension can increase profits by allowing manufacturers to tap into new markets and offer increased diversity in their inventory. Line extensions and brand extensions both allow companies to promote new products with reduced promotional costs because the new lines or brands benefit from being part of an established name.

Any time a company introduces a new brand or line, the company name could become tarnished if the product proves to be an immense failure. Consumers might feel less inclined to support the company's new products in the future. So each new extension, in some way, carries the reputation of the entire company, and that can backfire. Extensions can also cause intra-firm competition, wherein conflict arises among different divisions of a company.

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