Beyond decisions about individual products and services, the product strategy also requires product line decisions. That is, it calls for building a product line. But what is a product line, and how should it be set up? An introduction to product line decisions.
A product line is a group of products that are closely related manufactured by a single company. This close relationship comes from several product attributes: they function in a similar manner, are sold to the same target customers, are marketed in the same way or fall within the same price ranges. Each product line requires separate product line decisions.
Example of a long Product Line – Product Line Decisions
To give an example for a product line, a cosmetic company’s makeup product line might contain concealer, powder, blush, eyeliner, mascara and lipstick products. All of them are closely related and therefore part of one product line. The same company might also offer other product lines. For instance, one product line could be geared toward teenagers and another one toward woman older than 50 (e.g. an anti-age product line). Each of these product lines requires specific product line decisions.
A motor vehicle manufacturer may have several product lines. These could include heavy-duty vehicles, consumer cars and motorcycles. Also here, separate product line decisions need to be made.
Product Line Decisions no. 1: Product Line Length
The primary one of the product line decisions is the product line length. This means nothing else than the number of items in a product line. Certainly, the product line is too short if the company could increase profits by adding items to it. However, it is too long if profits could be augmented by dropping items. In order to find that out, each item in the product line should be assessed on a regular basis in terms of sales and profits. Then, the company can understand how each item contributes to the product line’s overall performance and make the right product line decisions.
The product line length can be influenced by company objectives and resources. For instance, a company might want to maintain longer product lines to protect against economic swings.
Product Line Decisions no. 2: Expanding the product line
Expanding the product line is the second one of the product line decisions. A company can expand its product line in two ways: Line Filling and Line Stretching. Both of these product line decisions involve adding items to the line. Line filling means adding more items within the present range of the line. Reasons for doing so include the goals to reach extra profits, to satisfy dealers, to use excess capacity etc. However, the company must not exaggerate: new items should be noticeably different from existing ones. Otherwise, customer confusion might be the consequence.
Line stretching means lengthening the product line beyond the current range. We can differentiate between downward, upward, and 2-way stretching. A company located at the upper end of the market may choose to stretch the product line downward. Thus, it may attract low-end customers and reach new targets. Upward stretching is appropriate if the company wants to add prestige to the current product line. Also, better growth rates and higher margins may be the attractive factor for upward stretching. To give an example: leading Japanese car manufacturers all introduced an upmarket brand: Honda with Acura, Toyota with Lexus, Nissan with Infiniti.
For a company in the middle range of the market, stretching the product line in both directions may be best. Thereby, the company can serve both the upper and lower ends of the market.
Product line decisions, obviously, need to be made carefully. However, the product line is only one element of the much larger product mix. Therefore, product line decisions need to be integrated with product mix decisions.