Businesses should approach diversification strategically. Line extension and brand building are not as simple as offering a product in a different shape. There needs to be a thoughtful marketing strategy to support the need and benefits of launching new products within the same product line.
Identifying customer needs and preferences
Performing thorough market research and analysis starts with identifying customer needs. Looking into insights on customer demographics, behaviors, and pain points can indicate what action your company can take to tailor products to customer preferences.
Perhaps your customers respond strongly to seasonal offers or simply want more of what you offer. These types of insights can lead you to add a seasonal flavor to a popular product line or create a sharing-size bag to accommodate customer needs.
Analysis of customer feedback, social media behavior, and more can highlight emerging customer preferences and help you spot gaps in existing product lines.
Analyzing market trends and competitor offerings
Understanding market dynamics and the competitive landscape will help you make informed decisions regarding product line extension. Here are a few ways in which analyzing market trends and competitor offerings can help you develop a product line extension:
- Spotting new opportunities: Market trend analysis may reveal niche segments or unexplored areas in which your business can tailor product offerings.
- Benchmarking and innovation: Looking into competitor products can serve as a benchmark in evaluating which proposed extensions are worth pursuing to gain a competitive advantage.
- Avoiding cannibalization: Competitor research can help you understand what products are already available in order to avoid launching products that could potentially cannibalize the sales of existing offers.
- Pricing and value proposition: Market research provides insights into pricing strategies and value propositions that resonate with your customer segments.
- Identifying white spaces: Research can point to "white spaces" in which customer needs are not being met by existing products.
Conducting SWOT analysis for product line extension
An effective method for preparing a successful product line extension is performing a SWOT analysis.
This exercise involves assessing the strengths, weaknesses, opportunities, and threats related to introducing new products or variations within existing product lines.
A SWOT analysis considers both internal and external factors that can impact the success of a brand extension. Here are a few examples of what this analysis could look like:
Strengths: Brand recognition, established distribution channels, customer trust, and marketing synergy.
Weaknesses: Potential cannibalization, overextension of resources and capacities, brand dilution, and quality control concerns.
Opportunities: Market demand, competitive advantage, cross-selling opportunities, and expansion into new markets.
Threats: Competitor response, fluctuating market conditions, regulatory barriers or requirements, and consumer reception.