If you’ve got strong brand in a particular market segment but you’re struggling to gain more market share, it might be time to consider a planned “product extension” strategy.
Product extension is when a business takes an established brand name and applies it to new products that are in the same product category. This is different to a “brand extension” which involves a brand moving into a new category.
A new product extension could be something as simple as a colour variant for a clothing product, a new flavour or a healthier version of a food or beverage product, or a more expensive “premium” version or cut-down “budget” version of a service. Sometimes it can be a bit bolder… where a distinctive new feature is added, or the product design is changed fundamentally.
There are countless examples of successful product extensions in the Australian market, across every industry. Think of the ever-growing product ranges of confectionary brands, soft drink makers and milk producers. Car makers, cosmetic companies and fashion labels do it too of course.
A product extension strategy can attract buyers to your brand who have slightly different preferences, lessen the cost of reaching buyers in the same market category who are already familiar with the brand, and can ultimately boost profitability with little risk involved (if you do it the right way).
When Do Product Extensions Fail?
It seems that for every successful product extension there’s one that didn’t work. And it’s the failures that get the publicity. Get a product extension project wrong and the strategy could backfire. You could end up diluting your brand’s value, and end up with less sales instead of more!
Be aware that an extension to an existing product line risks cannibalising sales of the original product, and don’t underestimate the costs involved in creating the new product and marketing it.
A far bigger danger is when you extend into territory where the features of the new product actually conflict with what your brand stands for and what it is known for in the marketplace; what is sometimes called “brand equity”. Mess with that and you’re eroding your brand at the most basic level.
Adding higher-priced product extensions where the price premium is justified in the mind of the consumer is likely to favourably affect perception of the brand, but if your plan involves the introduction lower-priced product extensions, be wary, because a lower quality product may attach a low-quality attribute to your brand.
How Do You Get It Right?
One way to ensure you get product extensions right is to do careful research, either yourself or with help from Baker Marketing. Talk to frequent and infrequent buyers of your current products to find out what attributes they value in your products, what might be missing, and what they would change if they could.
Also ask them about your competitors’ products. This can help you identify gaps in the market or attractive segments that competitors currently supply, but you don’t.
Will this new product actually cater to an unmet demand in the marketplace? Getting it right goes back to the first principles of product marketing:
- Determine the specific needs of customers in a profitable target market segment
- Identify product features that would meet to those consumers’ needs
- Create a product with a unique and easily identifiable value proposition.
One important reason to extend your product line is to grab more shelf space at retail level. Talk to retailers about what they want to offer their customers. There’s no point adding products if they’re not willing to give you shelf space, whether it’s real or virtual, so make sure they’re on board early on.
If you have a brand that operates at the premium end of its market space, but see a need to extend into lower-priced products to capture more of the market, either ensure that the products still offer outstanding value for money, or consider using a different brand name.
At the end of the day the most important thing is to offer product extensions that your end-users actually want, need or demand. Then monitor how the new products perform and consider your next move.