Expanding a product line is an important growth strategy for small businesses that want to increase revenue or market share. A product line is a group of products or services in the same category, such as pet foods, engineering components or IT support services.
Product-line expansion can take a number of forms, including new versions of an existing product, upgrades to existing products or completely new products.
The product-line expansion is important to companies that have products in the late stage of its life cycle. Products typically move through four stages: introduction, growth, maturity, and decline. Products are in the decline stage when they no longer meet customer needs or when their performance becomes inferior to products that have taken advantage of newer materials or technologies. To avoid losing business to competitors with higher performance products, companies must upgrade their existing products or develop new products that can compete effectively.
The product-line expansion enables companies to take advantage of opportunities in different market sectors. A pet food manufacturer, for example, might identify profitable opportunities to market pedigree versions of its current offerings. An IT support consultancy might identify a profitable niche sector in troubleshooting domestic broadband services. Those companies can expand their product lines by customizing existing products and services or introducing new products that match customer needs in the target sectors.
Introducing products that meet changing customer needs is an important driver of product-line expansion. Encouraging feedback through surveys or monitoring customer comments on social networks provides valuable insight into customers needs and preferences. A high level of favorable comments on a particular product feature that competitors offer is a good indicator of an opportunity for line expansion. Inviting customers to collaborate or contribute to product development also highlights opportunities and focuses attention on development priorities.
Expanding a product line can help to increase customer loyalty. Adding new products or variants of existing products enables companies to sell more to existing customers, without the effort and cost of acquiring new customers. Companies research the purchasing records of existing customers to identify products that competitors are currently supplying. An engineering components supplier, for example, can develop new products to manufacture or buy products from other suppliers to offer customers greater variety.