To Extend or Not to Extend?
Excerpt from Jagger Advisory’s article in Lubes’n’Greases magazine (September 2019)
Product line extensions can create value or spending sprees. Cast your glance at that retail shelf over there, lubricant marketers. It’s crowded with competing products. Consequently, brands are clamoring to set themselves apart, stand out and strike just the right chord with consumers. What’s more, within the commercial business-to-business spaces, OEM genuine products and private labels are proliferating. In the midst of this, are you creating enough value for your brand?
To answer, let’s visit the strategy of the leading global marketers. They have built strong “brand halos” by investing in worldwide marketing programs with advertising for their flagship brands. This contributes value across the broadest possible product portfolio. At the same time, they have sliced and diced customer segments to discover pockets where they can capture more profit. How? Niche product line extensions.
Well-crafted extensions can deliver a multitude of rewards. They leverage established and recognized brands, then they one-up those brands. They add promises that speak to specific customer preferences, priorities and lifestyle choices. By filling gaps, they enhance the stakes and the profit, too. That said, why aren’t product line extensions the route to all value all the time? It’s a matter of math. Doing that math and investigation rests on gaining full visibility of the costs.
Marketers must cast potential sales volumes and margins against investments that need to be made. The costs are not insignificant, including funds for manufacturing, technology, operations, marketing and inventory. Will the fruits of this strategy tip the scales in favor of the extra spending required? What’s more, the cost-benefit analysis must incorporate the issue of added complexity, which relates to customers as well as distributors and trade channels. Let’s see how it’s been done by the big guns.Read Full Article