Product Line Extension in Consumer Software Markets in the Presence of Free Alternatives

2016 ◽  
Vol 27 (2) ◽  
pp. 282-301 ◽  
Author(s):  
Aaron Baird ◽  
Chadwick J. Miller ◽  
T. S. Raghu ◽  
Rajiv K. Sinha
Keyword(s):  
Product Line ◽  
Line Extension ◽  
Software Markets

scholarly journals Product Line Extension among New England Craft Breweries

2016 ◽  
Vol 46 (1) ◽  
pp. 73-86 ◽  
Author(s):  
Joshua Berning ◽  
Michael McCullough
Keyword(s):  
New England ◽  
Product Line ◽  
Rapid Expansion ◽  
Economic Environment ◽  
Brewing Industry ◽  
Product Lines ◽  
Capital Costs ◽  
Line Extension ◽  
Competitive Nature ◽  
The U.S

The U.S. brewing industry was at a low point in the 1980s. Since that time, more than 4,000 new breweries of varying scales and scopes have entered the market. Given the rapid expansion in this industry, which involves large capital costs, it is useful to consider the competitive nature of individual firms. Using a sample of New England breweries, this study identifies several firm and geographic attributes that are linked to firms’ product offerings. We find that the breadth of product lines and nature of competition varies by brewery type and by the economic environment of the market.

Product line design with vertical and horizontal consumer heterogeneity: the effect of distribution channel structure on the optimal quality and customization levels

2020 ◽  
Vol 55 (1) ◽  
pp. 95-131
Author(s):  
Parisa Bagheri Tookanlou ◽  
Hartanto Wijaya Wong
Keyword(s):  
Distribution Channel ◽  
Product Line ◽  
Channel Structure ◽  
Fixed Cost ◽  
Content Type ◽  
Product Line Design ◽  
Segmentation Strategy ◽  
Line Extension ◽  
Market Coverage ◽  
Line Design

Purpose The purpose of this study is to analyze the problem of optimal product line design in marketing channels where consumers are heterogeneous in both horizontal and vertical dimensions. Design/methodology/approach This paper develops a model to evaluate when it is preferable for a firm to extend the product line in a vertical or horizontal direction. Consumers are modeled as being vertically heterogeneous with respect to their valuation of quality and horizontally heterogeneous with respect to their preference on the esthetic component of the product. These model characteristics allow us to consider a broader set of product line extension strategies. By considering both a vertically integrated channel and a decentralized channel, this study investigates how channel structure influences optimal product line design. The problem with supplemental numerical analyses is mathematically analyzed. Findings The analysis shows that a horizontal product line extension strategy that offers the customized product can be used as an alternative to a vertical product line extension strategy. If the fixed cost is not too high, offering the customized product with low quality may be preferred to the quality-based segmentation strategy. Furthermore, the analysis shows that the channel structure is influential as the preference for the horizontal product line extension strategy is more pronounced in the decentralized channel than in the centralized channel. Research limitations/implications The analysis presented in this paper is limited by the consideration of full market coverage. Further research is needed to see how the results can be generalized to the case with partial market coverage. Practical implications The analysis suggests that a firm may consider product customization as part of its product line strategy. Information regarding market characteristics and channel structure is important when deciding on the optimal product line design. Originality/value The model reflects a more realistic marketing strategy and channel structure than previous studies that typically consider product line extension in only one direction and focus on the centralized distribution channel. Combining the standard product line extension and customization strategies also represents an important contribution to the literature. These extensions produce interesting new results and insights into a firm’s optimal product line design strategy.

Car crisis and renewal: how Mercedes succeeded with the A-Class

2018 ◽  
Vol 39 (1) ◽  
pp. 3-14
Author(s):  
Laurent Tournois ◽  
Jean-Jacques Chanaron
Keyword(s):  
Dynamic Capabilities ◽  
Performance Outcomes ◽  
Product Line ◽  
Vertical Line ◽  
Annual Reports ◽  
Market Segment ◽  
Product Price ◽  
Content Type ◽  
Line Extension ◽  
Trade Offs

Purpose In mature industries, downward vertical (line) extension has become an increasingly popular strategy, particularly for automobile manufacturers aiming at expanding their consumer bases and/or avoiding competition in higher market segment. This paper aims to examine how Mercedes-Benz (MB) practiced a downward vertical line extension within the same product category. When commercialized as a product line innovation, the MB A-Class was the first and most symbolic move made by a premium brand in the automobile industry. Design/methodology/approach This paper investigates the microfoundations of a vertical downward extension strategy. To do so, the authors adopt a narrative style to analyze the story of the MB A-Class from its inception to its commercialization. Secondary data sources, such as company websites, annual reports, internal documents, books, public relations and press releases, were used. Qualitative as well as quantitative performance outcomes were assessed using market and product sales in Western Europe (1997-2016) and the results of an MB brand image survey conducted in 1998 following the accident faced by the A-Class. Findings The case illustrates that contrary to initial assumptions, lower-quality extensions may be relevant for prestige brands under certain conditions and identifies four strategy components that may drive a successful downward stretch: combine organizational, product, process and marketing innovation with the support of dynamic capabilities; manage paradoxes/contradictions in terms of product development; target the high-end of a lower consumer segment; and adopt a “brand humility talk scheme”. Research limitations/implications Existing studies primarily focus on consumers’ evaluations of vertical step-down extensions. Rare are the articles that adopt the company’s perspective. Moreover, additional research is needed to assess the short- and long-term impacts of vertical downward extension on performance outcomes. Practical implications The case of the MB A-Class encourages top executives to consider the trade-offs inherent to a down-market strategic move: keeping the (premium) brand’s standards high within a reduced cost/price envelope while learning the codes of the new/bottom of the market. In addition, the A-Class may serve as a fundamental school case for marketing managers and creative advertising agencies on what should and should not be done, whether at the product or at the advertising level. Originality/value This paper demonstrates that a premium brand that practiced a vertical downward line extension can expand its sales in a mass market, by targeting a small but growing segment with a high willingness to pay for more expensive products. This adds to the contention that it is not the downscale extension product price per se that negatively affects the parent brand but rather where it stands in the hierarchy of the market segment considered and the ability of the premium brand to integrate the downscale extension to its own history (i.e. combining its original values with tangible product benefits while backing the cause of the new market). Finally, the story of the A-Class strongly suggests that any company needs to upgrade its capabilities as part of the learning process of a new market to convert a business opportunity into a market success.

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