What are the risks involved in line extensions?

Sometimes, managers push their lines beyond limits. Fast moving consumer goods (FMCGs) in particular are available in too many variants. There are several risks associated with the line extensions.

Risks associated with line extensions

1. Expanded line without any clear cut role leads to confused customers and confused retailers: The lure of line extension has been strong. Managers add products to their line without reasoning. This creates situations of expanded line without assigning clear-cut role to the products.

As a result, market becomes over-segmented. Also, the product vision is blurred. Retailers are reluctant to carry the complete line. When some items are not available, consumers get disappointed. On the whole, line confusion results in confused customers and confused retailers which hurt the brand in the long run.

2. Brand loyalty is weakened: Every marketer’s dream is to build a set of loyal customers for their offerings. Loyalty is a state when a consumer is committed to an offering. Loyal customers do not switch over to competitive products. They allow marketers to reap the advantages of customer retention.

Line extensions involve variations being attached to a brand. This encourages customers to seek variety. This may tempt the managers to add too many variants to the core brand. Line extensions without sound logic encourage brand switching behaviors. Brand loyalty is thus weakened.

3. Variants are copied with an intention to neutralize competition: Sometimes, a firm may be forced to extend the line because of competitive conditions. When a company launches free flow salt, the other company would need to counter this by adding this variation to its line.

A spirit to counter competition results in proliferation of line extensions. Colgate added Colgate Gel in order to meet the competitive challenge posed by the Close Up.

4. The relationship between the marketer and trade partners gets strained: In line extensions, too many variants are added to the core brand. Marketers put pressure on their trade partners such as wholesalers and retailers to carry the complete line. But retailers do not find adequate shelf space in their stores to accommodate the various brand versions. When they come under heavy pressure to do so against their wishes, the trade partnership gets affected.

5. Ling extensions may act as a serious drain on company resources: Many times, new variants are added to product line without much strategic thinking. Over proliferated lines exhaust the scarce resources of the company. When extensions fail to work at the expected level, the resources employed in production are not recouped in time. The resources are permanently lost.

6. Line extensions do not have positive effect on demand creation: Some category of demand remains more or less the same. The primary demand is not expanded. For example, customers will not brush their teeth for more number of times. Nor do they buy or wear more clothes. Brand extensions must be consistent with the parent brand. There must be scope for identities for variants.

7. A lot of invisible costs are associated with line extensions: Most of the brand managers ignore-certain invisible costs associated with line extensions. These include effort fragmentation, image dilution, production complexity and distraction in research and development efforts.

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