Q: We started selling our first
hair-care product about a year ago. Now we'd like to add
additional products, but don't how to go about it. Any
advice?
A: There are many reasons to add
new products-or line extensions-to your company's product mix.
In fact, line extensions may be the answer to building sales and
moving your company in a whole new direction. Take a cue from big
business. Look at how Kraft, for instance, has added Jell-O Instant
Pudding and multiple permutations of the Jell-O brand in order to
capture new audiences and expand into previously untapped market
niches.
It all starts with a brand. Let's use Gillette as an
example. The brand encompasses a number of product lines, including
blades and razors, toiletries, writing instruments and lighters.
Individual products exist within each of the product lines. In
other words, Gillette's line of blades and razors extends to
Lady Gillette, Mach 3, Sensor and others. The company's
toiletries line includes Gillette Foamy, Dry Idea and Right Guard,
while its writing instruments line consists of Paper Mate and
Flair. This gives Gillette a wide product mix.
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You don't have to own a large business to benefit from this
kind of expansion. Having multiple product lines may allow a
growing business to diversify risk and capitalize on its
established reputation. And the number of product items (or line
extensions) in a product line can attract buyers with different
preferences, increase profitability thanks to market segmentation
and, for some businesses, even out seasonal sales patterns. Adding
new products to your existing product line can also help you
compete more broadly in your industry.
On the downside, there's the potential for overextension-new
products may cannibalize sales of older ones, or your resources may
be disproportionately siphoned off for slower-moving products. Of
course, that's where the principle of planned obsolescence
comes into play. It's no accident that each time
Hewlett-Packard and Canon introduce the latest incarnations of
their desktop printers, the older models with fewer features become
less desirable and eventually obsolete.
Know Your Product's Life Cycle
Every product you introduce has a life cycle of its own-some
long and others quite short. And your marketing strategy must vary
at each stage in that cycle.
- In the introduction stage, your marketing objectives are
to create awareness and stimulate product trials.
- To achieve the growth stage, you'll need to maximize
market share and penetration.
- Once your product reaches the maturity stage, the task
will be to maximize profitability while defending the market share
you've earned.
- When it begins to decline, you'll slowly phase out
the weak product, reduce expenditures and focus on retaining cash
flow while targeting hard-core loyal customers.
Four Steps to Expansion
You can add a new product to expand your business or merely to
replace an older product or group that's in decline. Just be
sure to take these four steps before moving forward:
- Determine the specific needs of your customers in each
high-priority market segment.
- Identify the product/service bundles (groups of features) that
would be most attractive to them.
- Create a unique value proposition for the proposed line
extensions and decide how you'll position the product in the
market segments you've identified.
- Determine the sales and distribution channels that will achieve
the highest penetration of your target market segments.
In all, you'll need to use market research and speak with
customers and marketing partners or distributors and evaluate
competitive products. This will help you to validate the present
level of demand for the product and the best channels for sales
distribution, plus shape the product messaging. If you do your
homework and proceed with an analytical eye, your line extension
will increase sales, help you reach new markets and build market
share overall for your growing business.
Kim T. Gordon is an author, marketing coach and media
spokesperson. Her newest book, Bringing Home The Business, identifies the
30 truths that can make the difference between success and failure
in a homebased business. To receive free how-to articles and advice
and get information on coaching and appearances, visit Small Business
Now, a site devoted exclusively to marketing your small
business.
The opinions expressed in this column are
those of the author, not of Entrepreneur.com. All answers are
intended to be general in nature, without regard to specific
geographical areas or circumstances, and should only be relied upon
after consulting an appropriate expert, such as an attorney or
accountant.