Companies manufacture and offer a variety of products to their customers. A product line is when a business offers a set of related and similar products. Companies keep changing their product line. For instance, Apple offers smartwatches, smartphones, Mp3 players, computers, tablets, etc. Each of the product lines is completely different from the others.
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What is Product Line Stretching?
Companies usually add new products into their current and existing product line. It helps them to update their product according to the needs of customers and remain competitive in the market. It’s a very important decision for them that whether or they should stretch their product line or not.
According to Philip Kotler and Armstrong, “A product line stretching occurs when a company wants to lengthen its product lines beyond its current line”
For instance, Apple offers and sells high-quality smartphones in the mobile phone market. It’s product line stretching whenever Apple launches a new model of the smartphone (basic, standard, and professional) and offers it to its target market.
Some companies have got a high budget range and they offer multiple products in different product lines to target a different segment of the market. They charge different prices to them like the low price, medium price, and premium price products.
A product line may comprise of different types of products. For instance, if coca-cola is going to introduce different types of high-quality soft-drinks at different price ranges. It would fall under the category of product line stretching as the company is launching premium products.
Line Stretching Vs Line Filling
Businesses and companies use both of these techniques to expand their current or existing product line. The difference is that life filling is when you add more product items within the present range of the product line. On the other hand, line stretching is when you increase the current product line beyond the current product range.
Line filling is when you add more product items to the existing products to exploit the market gaps and decrease the competition. It could mean offering different colors and designs of the same product.
Line stretching decision is when you increase the total number of products with the existing product range. It means that you offer more products with additional features in them.
Types of product Line Stretching with Examples
Most businesses usually stretch their product lines mainly in three ways.
They’re as follows;
Downward Product Line Stretching
Downward stretching occurs when a company is already offering medium and premium level products in the market. The company has got a high level of consumptions of the lower level product and the brand doesn’t want to lose its market.
The consumption of the lower level product is probably higher and it would jeopardize the market of medium and premium level. Companies perform downward product line stretching decisions to address this issue. It could be in any form like launching a new brand name, establishing new brand equity from scratch, or utilizing the existing brand name.
The smartphones of Samsung in Note and Edge are premium level product and they’re very costly or premium price range. The brand also offers smartphones of A-Series that are for the lower-level market. The consumption rate of the lower-level model is very high. Samsung does a lot of marketing and downward product line stretching because the brand doesn’t want to lose it.
The Parker pens have dominated the market of Montblanc and Cross in terms of growth, profitability, and turnover. Month Blanc and Cross have got the premium level product market and brand equity. On the other hand, Parker has a targeted market of both medium and premium level products. The brand has entered the medium level product market, therefore, it’s downward product line stretch.
Businesses and companies usually perform downward product line stretching mainly for three reasons;
- The premium level product market is ignoring the basic and medium level market.
- They want to kick out the competition at the lower level market and only want to compete at the premium level market if the competitor survives.
- They prefer to target both lower and premium level markets.
Upward Product Line Stretching
Upward product line stretching is contrary to downward stretching. Businesses and companies that follow the upward product line strategy usually operate the business at the lower level product market. They follow the upward product line strategy when they start offering premium level products.
An upward stretching decision is an ideal position and dream of many businesses. It’s because the businesses usually start with lower-level product line stretching and target the mass audience. When their business reaches the maturity stage, they introduce premium level products.
The goal of upward product line stretching is to grow and earn more profit and that’s why they offer premium products. When it comes to premium offers, a brand should have a strong database of customers and solid brand equity to prove its worth of offering premium products.
When Starbucks entered into the coffee business, there were many brands selling coffee at the medium and lower level price range. Starbucks started offering premium coffee at a premium price range to target the rich market. The ice cream brand (Hagen Daz) and bottle water brand (Evian) followed the same strategy.
The market comprised of many brands and they all were targeting the mass audience with lower and medium product line stretching strategy. The market needed an upward stretching decision with premium products. The above-mentioned brands launched their business with a medium level and then quickly moved up to the premium level product line stretching strategy.
The examples of upward product line stretching in the automobile industry are Honda, Toyota, Lamborghini, Bentley, Acura, and Volkswagen. These brands followed the upward stretching decision and offered premium products.
Two-way Product Line Stretching
A two-way stretching occurs when a brand targets both lower and premium level markets at the same time. The goal of two-way product line stretching is to cover and target the majority of the market. If a brand offers a medium-level product, and it considers that the market requires lower and premium level product stretching, then it has the option to offer two-way stretching.
Many brands follow the two-way stretching decision and offer all types of products to increase market share and profitability.
HUL offers many premium products under premium brand names like beauty soap (Dove) and ice cream (Magnum). The brand also offers lower level products.
Volkswagen also offers different categories of products to target different types of the audience under different brand names. Like Audi, Beetle, and many other brands target the middle and premium level market. Polo and other brands target the mass-customers.
The multinational brands that are operating their business in different countries often adopt different brand names. It’s not to jeopardize their parent brand equity. They may offer lower-level mass products in one country and premium products in the other under different brand names.
AB Electrolux is a multinational company and operating its business in different countries under different 50 brand names. Each brand is targeting different types of customers and following different product line stretching strategy.