Guidelines for Creating Product Line Extensions

If the examples of Boots and Crest aren't sufficient, the grocery store aisle is proof positive of how product line extensions can run amuck. The short term benefits of line extensions are so attractive to marketers. The long term pitfalls hard to recognize.

What guidelines can marketers use to better assess the wisdom of a line extension?

1. Identify the unique strategic importance of the new product
Why do you want to add the product to the existing line? Is this a customer-driven or a business-driven decision? What are the short-term objectives and what are the long term costs? The key here is uniqueness. You must have a viable, unique reason for disturbing the current product mix with a new offering.
2. Determine the customer fit for the new product
How does this product better fit the customer's needs? Here the focus is on the benefit, value and fit of the new product to the prospective customer. The benefit, value and fit must be significantly positive enough to persuade the target customer to change their purchase behavior. Obviously, you want that purchase behavior to change in your favor.
3. Examine the impact on channel behavior
How will the channel respond to the new product? Your channel could be a direct sales force, a third party (retailer, value-added reseller, etc.), an on-line store or some other means of reaching your customer. As an intermediary, the channel's response to your new product will directly affect the customer's perception of the product. Will the channel learn it? Will they stock it? Will they promote it? Will it affect the learning, stocking, promotion of other products in the line? Will it steal attention from a top seller?
4. Evaluate the impact on customer behavior
What happens when the customer is faced with this new purchase decision? How will they make the purchase decision - among other products in the line, between your offerings and your competitors'? You need to evaluate the behavior of existing customers, old customers lost to competitors, and brand new customers. To evaluate their behavior, you must have already developed a very clear understanding of why different customer segments purchase your product.
5. Compare the expected results from a product line extension with those from other marketing options
Will another product or marketing strategy achieve the same strategic goals? Is it better to replace an existing product in the line with an improved version? Can we achieve the same short-term results with a sales promotion? Do we need to retire an existing product to make conceptual room for the new product? Is the value inherent in this new product deserving of its own brand or product line?

Of course, there are a host of operational considerations as well. Modeling the true cost of the new product in the line across branding, marketing, manufacturing, and sales is equally important.

But maybe the very first test for a product line extension should be the viability of the proposed product name as compared with the rest of the products in the brand.

Wouldn't something like Crest Tartar Control Whitening Plus Scope Toothpaste or Boot's No. 7 Protect and Renew Intense Beauty Serum be enough indication that you have gone too far?