Not all new products have to start from scratch or be completely separate from your current assortment. A product line extension lets brands introduce new variations of existing products. Take Coca-Cola, for example. Maybe you’ve grown bored of the original Coca-Cola flavor and want a cherry vanilla flavor. Or you prefer a lighter version of the classic soda pop.
Coca-Cola caters to these customers with product line extensions that keep them excited and interested in the brand.
Businesses both large and small use product line extensions to reach a greater audience and increase revenue. This guide will walk you through examples and tips on creating an extension strategy, so you, too, can extend your brand’s product line.
What is a product line extension?
A product line extension is when an established company introduces a new variation of an existing product within the same category. The brand uses the value of the existing product to market and introduce new choices to consumers, with the goal of satisfying a refined customer segment in the market.
Types of product line expansions
There are two ways to expand a product line:
Horizontal extensions
Horizontal product line extensions involve maintaining the same price and quality while changing factors to differentiate the products. For example, a dry shampoo brand can offer new formulations to cater to different hair types. Horizontal extensions might change:
- Colors
- Flavors
- Scents
- Ingredients
Vertical extensions
Vertical product line extensions involve increasing or decreasing the quality and price of a product to create either a more accessible or a luxury product. That might mean changing the product’s:
- Size
- Features or specifications
- Materials
- Functionality
For example, a furniture store could implement a vertical product extension by upgrading the materials it uses to make a loveseat. Instead of its standard polyester, a synthetic material, its new product is 100% linen, a natural, more expensive fabric.
This lets the retailer target customers who are willing to spend more on premium products, without creating an entirely new product. It’s just the material that changes.
7 advantages of product line extensions
- Increased product variety
- Market diversification and responsiveness
- Revenue growth
- Cross-selling opportunities
- Risk mitigation
- Enhanced brand loyalty
- Economies of scale
Product line extensions offer a low-risk way to meet the needs of various customer segments and can be used as a competitive tool to increase a brand’s control over the market.
1. Increased product variety
While having too many choices can lead to decision fatigue, providing a few options can lead to happier customers. In his TED Talk on the “paradox of choice,” psychologist Barry Schwartz describes how people with a set of limited options often make decisions faster than if they have an expansive list of choices. The consumers with fewer options are usually more satisfied with their decisions versus those who have endless options.
Audience research and trends can help you learn what products your customers want and ensure you don’t offer too many choices.
2. Market diversification and responsiveness
Product line extensions let you target new customer segments that wouldn’t buy your current offerings. For example, a canned cocktail brand might launch a nonalcoholic version of its most popular product to appeal to people who don’t drink alcohol.
Product line extensions allow you to enter the market faster, which can let you respond to seasonal changes. For example, that same canned cocktail brand might add a pumpkin flavor during the fall to take advantage of the season.
3. Revenue growth
Compared to developing completely new products, line extensions are a quick, low-cost way to spike sales in the short term. Offering new products can increase revenue not only by letting you expand your total addressable market, but also by re-engaging your current audience.
4. Cross-selling opportunities
Cross-selling is a sales technique used to increase average order value. It works by recommending complementary products items based on each customer’s previous purchase or browsing history. Product line extensions can create new opportunities for bundling and cross-selling related products.
Body skin care brand Bushbalm looks at its bestselling products for inspiration when expanding its product line. By expanding into products that complement their best-sellers, Bushbalm can capitalize on earlier success and raise its cart value.
“We’ve looked at our top-selling products,” CEO David Gaylord says. “We know we have a dark spot treatment that’s really successful. What we’ve done is we’ve added new products; we call it a routine. If you’re combating dark spots or hyperpigmentation, we had one product. Then, we expanded the line to have a second product. That becomes a routine.”
5. Risk mitigation
Introducing a new product requires market research, development, and a go-to market strategy. This can be a time-consuming, costly process that might not end with a successful product despite your best efforts.
With product line expansions, you can eliminate some of those steps and save time and money. You can also strategically offer variations of your bestselling products—one you already know your audience loves—making it a less risky product to produce.
6. Enhanced brand loyalty
Because line extensions increase the number of products available to the market, they can keep your customer base interested and potentially away from your competitors. For example, if you sell flavored coffee pods and add in new decaf options, you give loyal customers more reasons to purchase from you and decrease their need to find a competitor that fills the gap.
7. Economies of scale
A company with an established production process and capacity to produce new products means lower upfront investment. Lean on existing supplier relationships or tweak manufacturing processes to quickly bring new product variations to market. This can result in economies of scale as the cost of producing a product becomes cheaper as the quantity of production increases.
Product line extension vs. brand extension: What’s the difference?
A product line extension involves variations of an existing product, whereas a brand extension involves expanding into brand-new product categories.
Brand extension example: Jack Daniels
Jack Daniels is a good example of a company that has done both product line and brand extensions. Its original whiskey is Old No. 7. Now, it offers a variety of flavors, like honey, cinnamon, and apple, that are blended with the brand’s signature whiskey. These beverages are product line extensions.
But Jack Daniels has also expanded beyond liquor. Barbecue sauce, praline pecans, and even coffee infused with its whiskey are examples of brand extension.
Successful product line extension examples
Here are three real-life examples of product line extensions in action:
Coca-Cola
During its more than 130 years in business, Coca-Cola has launched its fair share of product line extensions. If you look on any grocery shelf, you’ll notice a few different flavors and styles, such as Coca-Cola Vanilla.
A well-known example of a line extension was Coca-Cola’s release of Coca-Cola Zero Sugar (originally Coca-Cola Zero) in 2005. The company targeted the calorie-conscious market with Coca-Cola Zero Sugar.
Coca-Cola Zero Sugar still exists today. Coca-Cola’s products are similar, but different in that they go after different audiences. This gives the global brand a chance to take up more market share and grow sales for the corporation.
Bushbalm
Bushbalm has an extensive product line that has expanded over time. The brand originally sought to help prospective customers by formulating oils for ingrown hairs and razor burn. When the founders wanted to expand the brand, they wanted to find a similar issue they could target.
“We searched and we noticed dark spot treatment, which has a lot of search volume,” David explains. “That is a big concern people have, and then we said, ‘OK, it’s very similar to our product line. Let’s expand.’ If you’re going to expand, it’s figuring out something that’s close that you can go into.”
Its dark spot oil is an example of a horizontal product line extension. The brand continues to work with oils, which it originally launched with because it allowed “much more natural ingredients and very simplified formulas,” but it expands its market reach by adding new skin concern categories.
Bushbalm has also expanded horizontally by adding different scents, like Bermuda (which has hints of lemon) and Sweet Escape (a mix of vanilla and citrus), for its core products.
Vertically, the brand also offers products at different price points. For example, for its vajacial treatments, customers can choose from inexpensive hydrogel vajacial side strips to a more costly three-step vajacial kit.
“We’ve seen massive changes to our business through horizontal and vertical extensions,” CEO David Gaylord explains. “Upselling a new product in a category has led to growth in average order value (AOV). And new lines have helped us reach completely new audiences to target the growing potential total addressable market.”
Colgate
Colgate is one of the most valuable brands in the toothpaste market, largely due to a wide product assortment that addresses different target markets. Colgate began selling aromatic toothpaste in jars in 1873.
It has expanded its product line by addressing different pain points such as teeth whitening and enamel protection. For example, in 2000, Colgate launched its Sparkling White toothpaste to help consumers get white teeth while tackling tartar and cavities. The product still exists today and even has its own variations, like the Sparkling White Cinnamint.
Unsuccessful product line extension example: Crystal Pepsi
Not all product line extensions become lucrative opportunities. Even established brands like PepsiCo have introduced new items that customers don’t want—even if it is similar to a popular or trending product.
Back in 1992, PepsiCo launched Crystal Pepsi, a translucent version of its iconic soda. The premise was simple: The soda tasted exactly like its original line of cola. The only difference? It looked like water.
Crystal Pepsi was initially popular. “Everyone tried Crystal Pepsi. It was like a gigantic in-and-out product,” David Novak, former CEO of PepsiCo said on a podcast. “But people didn’t come back and buy it again. So it didn’t have the sustainability that I was hoping for.”
How to develop a successful product line extension strategy
- Define your objectives
- Review existing products
- Conduct market research
- Assess existing and potential competition
- Check finances and resources
- Develop a unique value proposition
- Establish a timeline
- Create and test prototypes
- Launch and monitor
Much like developing any new product, you should aim to extend your product line in a way that’s cost effective and productive. Here are the typical steps to develop your product line extension strategy:
1. Define your objectives
“It starts with vision,” David Gaylord, CEO of skin care brand Bushbalm, tells Shopify in an interview. David explains that for ecommerce brands to do line extensions successfully, they need to strategically plan and build their mission.
When planning an extension for Bushbalm, David and his team ask themselves several questions:
- Where are we going?
- What do we aspire to be?
- What verticals exist that revolve around our mission?
- How can we not pigeonhole ourselves into one product but rather expand into other categories?
Once the Bushbalm team decided on its mission, they could expand into different categories that aligned with the brand. “Our tagline now is ‘Skincare, Everywhere,’ and our mission to solve skin challenges, no matter how niche they sound,” David explains. The pivot allowed the brand to move from pubic care to treating eczema, psoriasis, hyperpigmentation, sun damage, and other types of skin irritation.
2. Review existing products
No one knows what will work best before they launch. However, a small investment in learning about your existing customer base and testing new products can help you avoid over-investing in a product that ultimately won’t sell.
Review your existing product line to determine which items customers are interested in. Ideally, you should supplement this with qualitative data. What’s the driving force behind their purchase? Which competitors did they consider before they bought from you?
3. Conduct market research
Market research can provide invaluable insights before you commit to a direction. You can run focus groups, conduct surveys, or chat with customers one-on-one to gather your audience’s input on what products they like and their pain points.
Aim to gather insights from multiple sources. More viewpoints or perspectives can give you a better understanding of the opportunities.
4. Assess existing and potential competition
Competitive analysis helps you assess which other brands offer similar products to the one you’re launching. Let’s say you’re expanding your candle product line to include new scents. Your biggest competitor prices their product much higher than yours and packages the candle in a reusable tin that customers repurpose when empty.
This demonstrates that customers likely care about sustainability and product packaging design—and they’re willing to pay more for it. So think about how you can design your own reusable packaging. Perhaps you partner with a local illustrator to design the candle jar, and share creative ways to reuse the empty pot on social media.
5. Check finances and resources
It’s great to have a unique product idea that you think customers will buy. But sometimes, it’s not feasible to invest thousands into product development and ultimately wind up with a product that takes years to generate a profit.
Set a product development budget and analyze capacity:
- Manufacturing and production costs. These are any fees associated with tooling, equipment, and prototyping.
- Production capacity. Your supplier’s lead times heavily impact your capacity.
- Legal costs. A legal professional can ensure your new product meets legal requirements before launch.
Some entrepreneurs secure funding to expand their product line without drawing cash from the business. Popular options include bank loans, lines of credit, and merchant cash advances. You could also look for grants to develop products, particularly if they help a local community.
6. Develop unique value propositions
Brand dilution can happen when products in the same category don’t have unique value propositions. For example, a hot sauce brand might expand its product line to include new levels of spice. The value proposition is clear; as is the target market. The new product targets people who like spicier sauces.
7. Establish a timeline
A product development timeline outlines key milestones in the process. It keeps everyone on track and accountable, while making the development process feel less overwhelming. You’ll know exactly what needs to be done, when, to meet the product launch date.
Work with stakeholders from each department to iron out a realistic product development timeline. For example, you might think that it’ll only take two weeks to create a marketing plan—but after chatting with the marketing team, you learn that it falls within the middle of their Black Friday planning. Add an extra two weeks to this part of your product roadmap to prevent falling behind.
8. Create and test prototypes
Prototypes let you test out new products without placing big bets or extensive inventory management.
You might even be able to test new designs with a print on demand service like Printful or Printify. It’s a quick way to get those products out into the world, and see how they perform.
If your product line extension includes adding new flavors or colors, you can opt for preorders. You can gauge interest in your product ideas before investing the time and money in crafting your inventory. Use a Shopify App, like Early Bird or Stoq, to launch preorder campaigns.
9. Launch and monitor the product line extension
Coordinate a launch that gets people excited about the line extension. For example, you could create a bundle that ties the new product to an existing one, or offer an introductory deal or discount to customers who’ve bought another product from the same line.
After the product launch, dive into your analytics to learn what worked and what you could improve on. Shopify Analytics shows how many sales you made during the launch day and how this compares to the original line. Supplement this with customer feedback to refine the product and adjust its messaging.
Free Go-to-Market Strategy Template
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Product line extension FAQ
Why are product line extensions important?
Product line extensions allow you to leverage an existing brand name to sell to new market segments. It gives brands a competitive advantage and can increase customer loyalty by offering more choices to potential customers.
What is an example of a product line?
Coca-Cola is an example of a product line. Alongside its original product (the original cola drink), it has launched different flavors, sizes, and low-sugar versions to cater to different tastes.
What is an example of a product line extension?
Making a chocolate chip version, a mint version, or an ice cream sandwich version of a product—like ice cream—are all types of line extensions. These provide variety and cater to specific customer preferences.
What are the risks of extending a product line?
Some risks of line extensions are releasing a product that confuses customers and retailers. This could lead to weakened brand loyalty, lower competitive advantage, and a strained relationship between the marketer and trade partners.
What often occurs when a product line extension is very similar to the other products of a company?
When a product line is too similar to a brand’s existing products, it can cause brand dilution. Customers may also get confused and abandon their purchase due to a lack of clear distinction between options.
What is the primary distinction between a line extension and a product modification?
A product line extension introduces new versions of the same core product, such as new flavors or colorways. A product modification, however, alters the functionality, design, or features of an existing product, replacing the older version.
