Core Concepts of Marketing

PRODUCTPLANNINGANDSTRATEGYFORMULATION 167

a productdecisioncouldcreateconflictwithinthechannelofdistribution.Inthecomputer
examplejustdescribed,thiscompanymayhaveenteredthesoftwarebusinessoverthestrong
objectionoftheirlong-telmsupplierofsoftware.Iftheirventureintothesoftwarebusi-
nessfails,re-establishinga positiverelationshipwiththissuppliercouldbequitedifficult.
A lineextensionstrategyshouldonlybeconsideredwhentheproduceris certainthat
thecapabilityexiststoefficientlymanufacturea productthatcompareswellwiththebase
product.Theproducershouldalsobesureofprofitablecompetitioninthisnewmarket.
Line-fillingstrategiesoccurwhena voidintheex istingproductline hasnotbeenfilled
ora newvoidhasdevelopedduetotheactivitiesofcompetitorsortherequestofconsumers.
Beforeconsideringsucha strategyseveralkeyquestionsshouldbeanswered:

• Canthenewproductsupportitself?


• Willit cannibalizeexistingproducts?


• Willexistingoutletsbewillingtostockit?


• Willcompetitorsfillthegapifwedon't?


• Whatwillhappenifwedon' t act?
  Assumingthatwedecidetofilloutourproductlinefurther,thereareseveralways
  ofimplementingthis decision. Threearemostcommon:

1. Productproliferation'theintroductionofnewvarietiesoftheinitialproductor
   productsthataresimilar(e.g., a ketchupmanufacturerintroduceshickory-flavored
   andpizza-flavoredbarbecuesaucesanda specialhotdogsauce).


2. Brandextension:strongbrandpreferenceallowsthecompanytointroducethe
   relatedproductunderthebrandumbrella(e.g.,Jell-Ointroducespiefillingand
   dietdessertsundertheJell-O brandname).


3. Privatebranding:producinganddistributinga relatedproductunderthebrand
   ofa distributororotherproducers(e.g.,Firestoneproducinga lessexpensivetire
   forK-Mart).
   Inadditiontothedemandofconsumersorpressuresfromcompetitors,thereareother
   legitimatereasonstoengageinthesetactics.First,theadditionalproductsmayhavea greater
   appealandservea greatercustomerbasethandidtheoriginalproduct.Second, theaddi-
   tionalproductorbrandcancreateexcitementbothforthemanufactureranddistributor.Third,
   shelfspacetakenbythenewproductmeansit cannotbeusedbycompetitors. Finally,the
   dangeroftheoriginalproductbecomingoutmodedishedged.Yet,thereis seriousriskthat
   mustbeconsideredaswell:unlesstherearemarketsfortheproliferationsthatwillexpand
   thebrand's share,thenewerformswillcannibalizetheoriginalproductanddepressprofits.
   Line-pruningstrategiesinvolvetheprocessofgettingridofproductsthatnolonger
   contributetocompanyprofits. Asimplefactofmarketingisthatsoonerorlatera product
   willdeclineindemandandrequirepruning. Timexhasstoppedsellinghomecomputers.
   Hallmarkhasstoppedseilingtalkingcards.
   A greatmanyofthecomponentsusedinthelatestautomobilehavereplacedfarmore
   expensiveparts,duetotheincreasedcostsinotherareasoftheprocess,e.g.,laborcosts.
   Usingmodernroboticstechnologyhashalved themanufacturingcostsofseveralprod-
   ucts.Throughsuchimplementation,KeeblerCookiesmovedfrompackagingtheircook-
   iestotallybyhandto 70 %automation.Otherpossiblewaysa companymightbecomemore
   efficientarebyreplacingantiquatedmachinery,movingproductionclosertothepointof
   sale,subcontractingout partofthemanufacturingprocess, orhiringmoreproductive
   employees.