Development of Product Lines
Having one extremely successful product can generate tremendous revenue and profit for a company, but developing a series of products that sell well -- a product line -- enables a business to prosper over the long term, even decades. Products usually have a life cycle, and begin to decline in popularity as the years go by because consumer tastes change and competitors introduce new and better products. For a business to continue to grow, it must consistently bring its own new, innovative products to market.
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Expand Market Scope
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By offering a line of products, a company can appeal to a number of demographic groups and expand the size of its total potential market. Hotel chains often have different brands that serve the needs of different groups. A chain might have a budget hotel brand, a midpriced hotel brand that caters to business travelers and a luxury or resort brand. The market is not only expanded to completely new customers, but the hotel chain can capture additional business from its existing customers. A frequent business traveler might use the same chain, but a different brand, when he takes his family on vacation.
Same Customer, Multiple Purchases
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Product line development allows a company to sell more than one product to the same customer. Acquiring a new customer is difficult and often expensive, but once the customer is satisfied with the first purchase, selling a second product to her is much easier. Food manufactures employ this strategy. A company that builds a brand image for excellent quality salsa could easily expand into other related products such as tortillas or hot sauce. A customer who enjoys preparing Southwest-style meals might purchase every product in the company's line if she had a good experience with the first product.
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Retain Customers for Life
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As consumers progress through their lives, their product preferences, needs, lifestyles and purchasing power change. Developing a product line that reflects these changes to offer to loyal customers enables a company to keep doing business with them. Automobile manufacturers employ this strategy. A manufacturer could offer a compact, low-price vehicle for young consumers just starting out, a minivan or SUV for couples with children, and a luxury car that middle-aged and older consumers can purchase as a symbol of accomplishment.
Challenges
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The first steps in developing a product are to pinpoint a customer need and then create a product that provides an exceptional solution to that need. To develop an entire line, the company must have a keen understanding of more than one customer need. It is critical that each product in the line provides a top-quality solution that will create the same level of customer satisfaction. One or more products in the line that are not highly praised by consumers can dilute the brand image of the other, highly regarded products. In planning a product line, the company's top management must identify what their organization does really well. This core competency must be the driving force behind each product in the line. Companies attempting to market products that are not matched well to customer needs often find that one or more products in the line perform below expectations.
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