Need of Line Extensions:
Line extensions strategy has enjoyed considerable support of the managers. In most of the product categories including fast moving consumer goods, consumer durables and services, line extension lias been the name of the game. It is an expansionist move.The firms seem to seek growth more vigorously. What lies behind the aggressive pursuit of line extensions? The following nine prominent reasons could be identified as to why firns seem to favour line extensions are as follows:
1. Customer Segmentation:
The key difference between the marketing of the past and today is that customer aggregation is becoming more and more difficult to hold and operate upon. Marketers are forced to climb down from mass marketing orientation to individual customer orientation.
That is,aggregate markets are now getting manifest into finer segments. It is relatively easier now to find segments on a more sophisticated basis. The marketing research allows so, and advances in marketing techniquwa allow easy operations of the same. In such a scenario, marketers by line extensions. Line extension is a low cost and low risk strategy to more effectively meet the needs of customer segments.
2. Customer Need for Variety:
The emergent market conditions are at work to promote consumer promiscuity (consumer buying behavior marked by an absence of brand loyalty). product standardisation, and consistency in quality, is encouraging customers to try new products or brands. It is the result of a desire to get stimulations and break away from boredom.
3. pricing Breadth:
Some time ago, Videocon launched 'Bazoomba' and BPL launched its 'QPF' series. What does this indicate? This show marketers desire to move up the customers to a higher price point. Such a move allows the firm to generate more sales and profit per customer. The conditions propelling (forcing) these extensions are the slowing down of volume growth in the color television market.
4. Capacity Utilisation:
Sometimes, firms are driven by the economic logic of building plant capacities which are efficient or world class, The investment in plant increases the fixed cost of operations. Accordingly, pressures emerge to maximize plant utilisation in order to quickly recover the fixed costs and achieve efficient cost of operations. Sometimes marketers may seek refuge in extensions as a means of utilising excess capacity. By effecting minor changes in the product and plant, the company can substantialy improve its capacity and make up for the high fixed cost element in its operations.
5. Quick Gains:
Line extensions provide an opportunity to achieve quick gains in sales performance. Launching a new brand may cost a firm five to six times the amount needed to launch an extension. Moreover, creation involves a lot of uncertainty and risk. It is a long drawn out process. Hence, managers see line extensions as a vehicle to generate more sales quickly and relatively inexpensively. The path of line extension is far more predictable. Unlike brand creation, lien extensions depend less on cross functional integration.
6. Competitive Reasons:
A marketer with a more extensive product line up is usually in a better position to get access to the shelf space. This is the case with Hindustan Lever. One walks into any store and discover how much retail space is occupied by a brand which offers a number of variants in different forms, shapes, sizes and flavours. This obviously comes at to the expense of the competition:
7. Trade Demands:
Marketing environment has seen the emergence of new forms of trade partners and retail channels. The trade partners often exert pressures on marketers to extend the line by developing products which meet their unique marketing strategy needs. They may place demands for bulk-packages, multi-packages, customised and derivative models.
8. Counter Competition:
Sometimes a firm may be forced to extend the line because of competitive conditions. That is, extending the line may become imperative to counter competition.
9. Image Benefits:
Line extensions can recharge the image of the brand. If there is danger associated with unbridled extensions, there are gains which could be reaped by careful extensions. There is very real opportunity to build a positive image and renew it. A well-managed extension can bring enormous benefits.
Line extensions strategy has enjoyed considerable support of the managers. In most of the product categories including fast moving consumer goods, consumer durables and services, line extension lias been the name of the game. It is an expansionist move.The firms seem to seek growth more vigorously. What lies behind the aggressive pursuit of line extensions? The following nine prominent reasons could be identified as to why firns seem to favour line extensions are as follows:
1. Customer Segmentation:
The key difference between the marketing of the past and today is that customer aggregation is becoming more and more difficult to hold and operate upon. Marketers are forced to climb down from mass marketing orientation to individual customer orientation.
That is,aggregate markets are now getting manifest into finer segments. It is relatively easier now to find segments on a more sophisticated basis. The marketing research allows so, and advances in marketing techniquwa allow easy operations of the same. In such a scenario, marketers by line extensions. Line extension is a low cost and low risk strategy to more effectively meet the needs of customer segments.
2. Customer Need for Variety:
The emergent market conditions are at work to promote consumer promiscuity (consumer buying behavior marked by an absence of brand loyalty). product standardisation, and consistency in quality, is encouraging customers to try new products or brands. It is the result of a desire to get stimulations and break away from boredom.
3. pricing Breadth:
Some time ago, Videocon launched 'Bazoomba' and BPL launched its 'QPF' series. What does this indicate? This show marketers desire to move up the customers to a higher price point. Such a move allows the firm to generate more sales and profit per customer. The conditions propelling (forcing) these extensions are the slowing down of volume growth in the color television market.
4. Capacity Utilisation:
Sometimes, firms are driven by the economic logic of building plant capacities which are efficient or world class, The investment in plant increases the fixed cost of operations. Accordingly, pressures emerge to maximize plant utilisation in order to quickly recover the fixed costs and achieve efficient cost of operations. Sometimes marketers may seek refuge in extensions as a means of utilising excess capacity. By effecting minor changes in the product and plant, the company can substantialy improve its capacity and make up for the high fixed cost element in its operations.
5. Quick Gains:
Line extensions provide an opportunity to achieve quick gains in sales performance. Launching a new brand may cost a firm five to six times the amount needed to launch an extension. Moreover, creation involves a lot of uncertainty and risk. It is a long drawn out process. Hence, managers see line extensions as a vehicle to generate more sales quickly and relatively inexpensively. The path of line extension is far more predictable. Unlike brand creation, lien extensions depend less on cross functional integration.
6. Competitive Reasons:
A marketer with a more extensive product line up is usually in a better position to get access to the shelf space. This is the case with Hindustan Lever. One walks into any store and discover how much retail space is occupied by a brand which offers a number of variants in different forms, shapes, sizes and flavours. This obviously comes at to the expense of the competition:
7. Trade Demands:
Marketing environment has seen the emergence of new forms of trade partners and retail channels. The trade partners often exert pressures on marketers to extend the line by developing products which meet their unique marketing strategy needs. They may place demands for bulk-packages, multi-packages, customised and derivative models.
8. Counter Competition:
Sometimes a firm may be forced to extend the line because of competitive conditions. That is, extending the line may become imperative to counter competition.
9. Image Benefits:
Line extensions can recharge the image of the brand. If there is danger associated with unbridled extensions, there are gains which could be reaped by careful extensions. There is very real opportunity to build a positive image and renew it. A well-managed extension can bring enormous benefits.
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