Product line extension refers to the development of items that would expand the width of the product mix a company has to offer.
The correct answer and explanation is :
Correct Answer:
Product line extension refers to the process of introducing new products under an existing brand name within the same product category. These products can be variations or additions to the current product offerings, aiming to cater to different customer preferences or market segments. The goal of product line extension is to increase a company’s market share and meet the diverse needs of its customers.
Explanation:
A product line extension allows a company to expand the range of products it offers without changing the brand identity. This strategy helps businesses capitalize on their existing brand reputation, customer base, and marketing channels while diversifying their product offerings. By adding new products to an established line, companies can fill gaps in the market, reach different customer segments, and boost sales.
For example, a beverage company that already offers soda might introduce variations such as diet soda, flavored soda, or low-sugar versions. This expands their product line while still staying within the same product category.
The advantages of product line extensions include:
- Brand Leverage: A company can use its existing brand equity to promote new products, which helps reduce the cost and effort involved in creating a new brand identity.
- Customer Retention: By offering more choices within the same product category, a company can keep existing customers loyal by meeting their evolving needs and preferences.
- Increased Revenue Opportunities: A broader product line can attract new customers and increase overall sales by appealing to a more diverse group.
- Market Penetration: Companies can reach untapped market segments by offering products tailored to different demographics, such as age groups or income levels.
However, product line extensions must be carefully planned. If the new products are too similar to existing ones or do not meet customer expectations, it can dilute the brand and confuse consumers.