Page 135 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes For example, for quite some time, Nirma had only a single detergent brand and subsequently
added a new product line by introducing a bathing soap. HUL realised the serious threat from
Nirma washing powder and introduced cheaper versions of detergents.
Companies make decisions that concern either adding new items in existing product lines,
deleting products from existing product lines, or adding new product lines. Another aspect
relates to upgrading the existing technology either to reduce the product costs or to improve
quality, for stretching (downwards, upwards, or both ways), or line filling.

Product managers need to examine closely, the sales and profits of each item in a product line.
The findings will help them decide whether to build, maintain, harvest, or divest different items
in a particular product line.
Line Stretching: Product lines tend to lengthen over the years for different reasons such as excess
manufacturing capacity, new market opportunities, demand from sales force and resellers for a
richer product line to satisfy customers with varied preferences, and competitive compulsions.
Lengthening of lines raises costs in many areas and decisions are based on careful appraisal.
However, at some point in time somebody, often the top management intervenes and stops this.
Downward Line Stretch: Companies sometimes introduce new products with an objective
of communicating an image of technical excellence and high quality, and locate at the
upper end of the market. Subsequently, the company might stretch downwards due to
competitor’s attack by introducing a low-end product in response to competitive attack,
or a company may introduce a low-end product to fill up a vacant slot that may seem
attractive to a new competitor. Another possibility is that market may become more
attractive at low-end due to faster growth rate.

Example: P&G introduced its Ariel Micro system detergent at high-end assuring high
quality. Customer response was not encouraging and the company saw more opportunities at
lower end and introduced cheaper green alternative Ariel Super Soaker. Mercedes has offered
its E Class model to compete at much lower price point than its high-end S Class models.

Figure 6.2: Line Stretching Decisions

New
Product
High High High

Present
New
Price Price Price Present
Product Product Product
New Present New
Low Product Low Product Low Product

High

Low High Low Low
High

Quality Quality Quality
Downward Stretch pward Stretch Both-Way Stretch
U
Downward stretch sometimes poses risks. Low-end competitors may attack by moving
into high-end, or for a prestige-image company introduction of a low-end model may
adversely affect its product-image.

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