Extend Profits, Not Product Lines

Unchecked product-line expansioncan weaken a brand's image,disturb trade relations,and disguise cost increases.

Extend Profits,Not Product Lines

by John A. Quelch and David Kenny

In the last ten years, products have proliferated atan unpreeedented rate in every category of con-sumer goods and services, and the deluge shows fewsigns of letting up. Most companies are pursuingproduct expansion strategies-in particular, line ex-tensions-full steam ahead. At the same time, how-ever, more and more evidence is indicating the pit-falls of such aggressive expansion if it is not wellmanaged: hidden cost increases, weakened hrandimages, and trouhled relations with distrihutorsand retailers.

Unfortunately, in most organizations, managershave no incentive to question their produet-line-extension strategies. Marketers argue for more lineextensions to serve an increasingly segmented mar-ketplaee, and sales managers use extensions to jus-tify hiring more salespeople. While manufacturingmanagers are concerned ahout the eomplexity ofproduction and the finance department has a clearinterest in cost control, the information systemsneeded to cull the data that would justify a morefocused product line are often not in plaee.

How can companies encourage an ohjective as-sessment of product-line strategy? Ultimately, theremedy lies in proving that a focused, well-man-aged line leads to greater profits and is an asset for

John A. Quelch is the Sebastian S. Kresge Professor ofMarketing at the Harvard Business School in Boston.Massachusetts. David Kenny is a vice president at Bain&) Company, also in Boston, where he specializes in con-sumer-marketing and brand issues.

the entire organization. But first,senior managers must overcomesome ingrained beliefs about theadvantages of line extensions.

The Lure of Line Extensions

Seven factors explain why so :many companies have pursued lineextensions as a significant part oftheir marketing strategies.

Customer Segmentation. Man-agers perceive line extensions asa low-cost, low-risk way to meetthe needs of various customersegments, and hy using more so-phistieated and lower-cost mar- •ket research and direct-marketingtechniques, they can identify andtarget finer segments more effec-tively than ever hefore. In addi-tion, the depth of audience-pro- (ftfile information for television, Tradio, and print media has im- \proved; managers can nowtranslate complex segmen-tation schemes into effi-cient advertising plans.

Consumer Desires. Moreconsumers than ever areswitching hrands and trying

DRAWINGS BY PAUL MEISEL

PRODUCT-LINE EXTENSIONS

products they've never used before. Line extensionstry to satisfy the desire for "something different" byproviding a wide variety of goods under a singlebrand umbrella. Such extensions, companies hope,fulfill customers' desires while keeping them loyalto the hrand franchise.

Moreover, according to studies conducted by thePoint-of-Purchase Advertising Institute, consum-

Most managers will extend a linebefore they will investthe time or assume the careerrisk to launch a new brand.

ers now make around two-thirds of their purchasedecisions about grocery and health-and-beauty prod-ucts on impulse while they are in the store. Lineextensions, if stocked by the retailer, can help abrand increase its share of shelf space, thus at-tracting consumer attention. When marketers co-ordinate the packaging and labeling across all itemsin a brand line, they can achieve an attention-get-ting billboard effect on the store shelf or displaystand and thus leverage the brand's equity.

Pricing Breadth. Managers often tout the superiorquality of extensions and set higher prices for theseofferings than for core items. In markets subject toslow volume growth, marketers can then increaseunit profitability by trading current customers upto these "premium" products. In this way, evencannibalized sales are profitahle - at least in theshort run.

In a similar spirit, some line extensions are pricedlower than the lead product. For example, Ameri-can Express offers the Optima card for a lower an-nual fee than its standard card, and Marriott intro-duced the hotel chain Courtyard by Marriott toprovide a lower-priced alternative to its standardhotels. Extensions give marketers the opportunityto offer a broader range of price points in order tocapture a wider audience.

Excess Capacity. In the 1980s, many manufactur-ing operations added faster production lines to im-prove efficiency and quality. The same organiza-tions, however, did not necessarily retire existingproduction lines. The resulting excess capacity en-courages the introduction of line extensions thatrequire only minor adaptations of current products.

Short-Term Gain. Next to sales promotions, lineextensions represent the most effective and least

imaginative way to increase sales quickly and inex-pensively. The development time and costs of lineextensions arc far more predictable than they arefor new brands, and less cross-functional integra-tion is required.

In fact, few hrand managers are willing to investthe time or assume the career risk to shepherd newhrands to market. They are well aware of the fol-

lowing: major brands have stayingpower (almost all of the 20 brandsthat lead in consumer awarenesswere on that list 20 years ago); thecost of a successful brand launch inthe United States is now estimatedat S30 million, versus $5 million fora line extension; new branded prod-ucts have a poor success rate |onlyone in five commercialized newproducts lasts longer than one year

on the market); and consumer goods technologieshave matured and are widely accessible. Line ex-tensions offer quick rewards with minimal risk.

Finally, senior managers often set objectives forthe percentages of future sales to come from prod-ucts recently introduced. At the same time, underpressure from Wall Street for quarterly earnings in-creases, they do not invest enough in the long-termresearch and development needed to create gen-uinely new products. Such actions necessarily en-courage line extensions.

Competitive Intensity. Mindful of the link he-tween market share and profitability, managers of-ten see extensions as a short-term competitive de-vice that increases a brand's control over limitedretail shelf space and, if overall demand for thecategory can be expanded, also increases the spaceavailable to the entire category. Frequent line ex-tensions are often used hy major brands to raise theadmission price to the category for new branded orprivate-lahel competitors and to drain the limitedresources of third- and fourth-place brands. Crestand Colgate toothpastes, for example, hoth avail-able in more than 35 types and package sizes, haveincreased their market shares in the last decade atthe expense of smaller brands that have not beenahle to keep pace with their new offerings.

Trade Pressure. The proliferation of different re-tail channels for consumer products, from cluhstores to hypermarkets, pressures manufacturers tooffer broad and varied product lines. While retailersobject to the proliferation of marginally differenti-ated and "me-too" line extensions, trade accountsthemselves contribute to stock-keeping unit (SKU)proliferation hy demanding either special packagesizes to fit their particular marketing strategies (for

1S4 HARVARD BUSINESS REVIEW September-Octuber 1994

example, bulk packages or multipacks for low-prieeclub stores) or customized, derivative models thatimpede comparison shopping hy consumers. Black& Decker, for example, offers 19 types of irons, inpart to enahle competing retailers to stock differentitems from the line.

The Pitfalls of Proliferation

Against this backdrop, it's easy to see why somany managers have been swept into line-exten-sion mania. But, as more managers are discovering,the problems and risks associated with extensionproliferation are formidable.

Weaker Line Logic. Managers often extend a linewithout removing any existing items. As a result,the line may expand to the point of oversegmenta-tion, and the strategic role of each item becomesmuddled. Salespeople should be able to explain thecommercial logic for each item. If they cannot, re-tailers turn to their own data- the information col-lected by checkout scanners-to help them decidewhich items to stock. Invariably, fewer retailersstock an entire line. As a result, manufacturers losecontrol of the presentation of their lines at thepoint of sale, and the chance that a consumer's pre-ferred size or flavor will be out of stock increases.

What's more, a disorganized product line canconfuse consumers, motivating those less interest-ed in the category to seek out a simple, all-purposeproduet, such as All Temperature Cheer in thelaundry detergent category.

Lower Brand Loyalty. Some marketers mistaken-ly believe that loyalty is an attitudeinstead of understanding that loyaltyis the behavior of purchasing thesame product repeatedly. In the past50 years, many of the oldest andstrongest brands have had two andthree generations of eustomers buy-ing and using products in the sameway. When a company extends itsline, it risks disrupting the patternsand habits tbat underlie brand loyal-ty and reopening the entire purchase decision.

Although line extensions can help a single brandsatisfy a consumer's diverse needs, they can alsomotivate customers to seek variety and, hence, in-directly encourage brand switching. In tbe shortrun, line extensions may increase tbe market shareof tbe overall brand franchise. But if cannihaliza-tion and a shift in marketing support decrease thesbare held by the lead product, tbe long-term healthof the franchise will he weakened. This is particu-larly true when line extensions diffuse rather than

reinforce a brand's image in the eyes of long-stand-ing consumers witbout attracting new customers.

Underexploited Ideas. By bringing importantnew products to market as line extensions, manycompanies leave money on tbe table. Some productideas are big enough to warrant a new brand. Tbeline extension serves the career goals of a manageron an existing brand better than a new brand does,but long-term profits are often sacrificed in favoi- ofshort-term risk management.

Stagnant Category Demand. Line extensionsrarely expand total category demand. People do noteat or drink more, wash tbeir hair more, or brushtheir teeth more frequently simply because theyhave more products from whieh to choose. In fact, areview of several produet categories shows no posi-tive correlation between category growth and lineextensions. (See the chart "Line Extensions Don'tInerease Demand."} If anything, there is an inversecorrelation as marketers try in vain to reinvigoratedeclining categories and protect their shelf spacethrough insignificant line extensions.

Poorer Trade Relations. On average, the numberof consumer-packaged-goods SKUs grew 16% eachyear from 1985 to 1992, while retail shelf space ex-panded by only 1.5% each year. Retailers cannotprovide more shelf space to a category simply be-cause there are more products within it. They haveresponded to the flood by rationing their shelfspace, stocking slow-moving items only when pro-moted by their manufacturers, and charging manu-facturers slotting fees to obtain shelf space for newitems and failure fees for items that do not meet

People do not eat more, drinkmore, or wash their hair morejust because they have more

products from which to choose.

target sales within two or three months, As manu-facturers' credibility has declined, retailers haveallocated more shelf space to their own private-label products. Competition among manufacturersfor the limited slots still available escalates overallpromotion expenditures and shifts margin to theincreasingly powerful retailers.

More Competitor Opportunities. Share gainsfrom line extensions are typically short-lived. Newproducts can be matched quickly by competitors.What's more, line-extension proliferation reduces

HARVARD BUSINESS REVIEW September-October 1994 155


.ine Extensions Don't Increase Demand

60%

52.8%

46,7%

(16%) (2.6%1 (14.1%) [35%] (15.7%) (9.3%) 6.3%

Real category growth (decline) in 1993 dollars

Sources: Marketing Intelligence Services; Nieken No'fh America, SCANTRACK

the retailer's average turnover rate and profit perSKU. This ean expose market leaders to brands thatdo not attempt to mateh all the leaders' line exten-sions but instead offer produet lines concentratedon the most popular line extensions. As a result,on a per-SKU basis, brands sueh as SmithKlineBeecham's Aquafresh toothpaste can deiiver a high-

Traditional accountingsystems can hide the costs ofline-extension proliferation.

er direet product profit to the retailer than brandswith larger shares and more SKUs.

Increased Costs. Companies expeet and plan fora number of costs associated with a line extension,such as market research, product and packagingdevelopment, and the product launeh. The brandgroup may also expect certain increases in admin-istrative eosts: planning tbe promotion calendartakes more time wben an extension is added to theline, as does deciding on the advertising allocationsbetween the eore brand and its extensions. But

managers may not foresee the fol-lowing pitfalls:D Fragmentation of tbe overallmarketing effort and dilution oftbe brand image.• Increased production complexi-ty resulting from sborter produc-tion runs and more frequent linecbangeovers. [Tbese are some-what mitigated by the ability tocustomize products toward theend of an otherwise standardizedproduction proeess with flexiblemanufacturing systems.)D More errors in foreeasting de-mand and inereased logistiescomplexity, resulting in increasedremnants and larger buffer inven-tories to avoid stockouts.n Increased supplier costs due torusb orders and the inability tobuy tbe most eeonomic quantitiesof raw materials.D Distraction of tbe researeb anddevelopment group from newproduct development.

Tbe unit costs for multi-itemlines ean be 25% to 45% higher

tban the theoretical cost of producing only themost popular item in the line. |See the chart "TheCost of Variety.") The inability of most line ex-tensions to increase demand in a category makesit bard for companies to recover tbe extra coststhrough increases in volume. And even if a lineextension can command a higher unit price, the

expanded gross margin is usually in-sufficient to recover sucb dramaticincremental unit costs.

The eosts of line-extension prolif-eration remain bidden for severalreasons. First, traditional eost-ac-counting systems allocate overheadsto items in proportion to tbeir sales.These systems, whicb are common

even among companies pursuing a low-cost-pro-ducer strategy, overburden the high sellers and un-dercharge the slow movers. A detailed cost-alloca-tion study of one line found that only 15% of theitems accounted for all the brand's profits. Tbatmeans tbat 85% of tbe items in the line offered lit-tle or no return to justify their full eosts.

Second, during tbe 1980s, marketers were able toraise priees to cushion tbe cost of line extensions. Areview of 12 packaged-goods companies shows thatprice increases in excess of raw-material-cost in-

1S6 CHART DRAWINGS BY KATE PESTANA

creases contributed 10.4 additional percentagepoints to gross margins between 1980 and 1990, but8.6 points were absorbed by increased selling, gen-eral, and administrative [SG&A) eosts. Now thatlow inflation and the recent recession have restrict-ed marketers' ability to raise prices, margins will bemore clearly squeezed by new line extensions.

Third, line extensions are usually added one ata time. As a result, managers rarely consider thecosts of complexity, even though adding several in-dividual extensions may change the cost structureofthe entire line.

Onee a company's senior managers take the timeto examine the downside of aggressive line exten-sion, rationalizing the product line is a fairlystraightforward process. Consider the case of a lead-ing U.S. snack foods company, which we will callSnaekco. For several years, Snackeo extended itsline at a dizzying pace. More recently, the compa-ny has discovered that a carefully focused line in-creases both profits and sales.

Snackco's Fall and RiseIn the late 1980s, Snackco was active in leader-

ship markets, that is, markets the company domi-nated, and competitive markets, in which Snackcowas at parity or weaker than its main competitor.Over time, Snackco's product line had proliferated:between 1987 and 1989, the company had increasedits new offerings by 20%. During that period, how-ever, overall sales remained flat.

Alarmed by the data, Snackco's president andmarketing vice president commissioned a study todetermine why the company's line-extension strat-egy wasn't working. The study revealed that theline extensions actually reduced sales and marketshare to some extent by crowding out the most pop-ular items to make room for the new products.

In competitive markets, where shelf spaee wasmost constrained, the problem was especially acute.Random store checks revealed that the most popu-lar items were out of stoek between 5% and 50%of the time. The research showed that up to 40% ofSnackco's customers deferred purchases or boughtcompetitors' products if their favorite Snackcoproduct was unavailable, while the remainderchose from tbe Snackco selections still in stock. Italso projected that by recovering half the volumelost from customers who deferred purchases orswitched brands, Snackco could increase its salesvolume by as much as 10%.

The figures prompted Snackco's senior managersto develop a new product-line strategy. First, thecompany used consumer tracking panels to classify

products by both household purchases and usagefrequeney. Then Snackco divided its product lineinto four categories. (See the chart "Focus on Popu-lar Products.")

Core products were determined to be those usedby more than one-third of consumers and boughtmore than twice a year by each consuming house-hold. This group of produets accounted for 20% ofthe Snackco line and 70% of the line's sales vol-ume. Snackco managers decided to adjust manufac-turing and delivery schedules to ensure that theseproducts were always in stock in both leadershipand competitive markets.

Niche products were those that were bought fre-quently, but only by small subsegments of con-sumers, often concentrated in one or more geo-graphical markets. This group aeeounted for 10% ofthe line and 10% of sales volume. Like core prod-ucts, niche products were important to the house-holds buying them. Snackco management decidedto maintain them in stores where they had suffi-eient sales velocity but to drop them in other mar-kets to make room for more core products.

Seasonal and holiday products were bought bymore than one-third of the households but onlyonce a year. Consumers often bought these prod-ucts on impulse in addition to their core and nicheselections. Items in this group represented S% ofthe product line and 10% of sales volume. Manage-ment decided to continue selling these items inboth leadership and competitive markets and ob-tain special displays during active selling periods.

Filler products accounted for the remaining 65%of the product-line items hut only 10% of the sales

The Cost of Variety

139132

128125



When Snackco managers reaiizcd that filler products were the least profitable items in the line,they cut the number of fillers to open up shelf space for more popular products.

volume. These were also purchased on impulse buthad a much lower appeal than the seasonal prod-ucts. When Snackco managers analyzed the hiddencosts of each line extension, they found that filleritems were the least profitable, even though theirraw contribution margins were often higher. As aresult, the managers decided to cut the number offiller products in the Snackco line to open up moreshelf space for its most popular products. Thesecuts would be greatest in competitive markets,where Snackco would focus on building share forits core products. In leadership markets, Snackcowould selectively retain filler products to defend itsleadership position and block shelf space.

Snackco's managers believed that the new strate-gy was on target, but they also knew that withoutthe support of the sales force, any efforts to imple-ment the plan would fail. So, backed by Snackco'spresident, one of the sales regions undertook a four-montb test to determine the impact of refocusingcore products versus continuing line extensions.Not only did market share increase during the test,but sales-force compensation also increased be-cause of the faster turnover of the more popularitems in the line, which were given additional shelfspace at the expense of the slower-moving items.

The test results generated positive word ofmouth throughout the sales organization andearned tbe approval Snackco managers needed. Thenew product-line strategy was launched nation-wide the following year. As added insurance, thecompany invested a considerable sum to train the

sales force to use handheld computers that trackedindividual item movement by store, thereby pro-viding continuous evidence that the new product-line concept was succeeding.

What's more, the product-line changes were ac-companied by a change in advertising strategy.Snackco shifted from an umbrella advertising ap-proach for the whole line to a strategy that focusedon its flagship products. Advertisements for theseproducts emphasized the Snackco brand and there-by promoted the brand's line extensions. Over thepast two years, Snackco has made significant gainsin market share and volume, which in turn havegenerated even higher margins.

An Action AgendaLike Snackco, some companies have hegun to

scrutinize - and rationalize - their product-linestrategies. In 1992, for example, Procter & Gambleannounced that it would eliminate 15% to 25% ofits slower-moving SKUs over 18 months. This moverepresented a major turnaround from 1989 to 1990,when, over a 20-month period, the company intro-duced 90 new items, not one of which carried a newhrand name. The reason? P&G computed the nega-tive impact of slow movers on manufacturing andlogistics costs. The company was also reacting toretailers' threats to drop slow-moving P&G SKUs.As a result of the new strategy, P&G can now closeless productive plants, reduce marketing-manage-ment overhead, concentrate advertising resources

158 HARVARD BUSINESS REVIEW Scptembcr-Octobtr

on its strongest brands, and open up shelf space forgenuinely new products.

Chrysler is also realizing the advantages of amore focused product line. In the late 1980s, Chrys-ler offered in theory over one million configura-tions of its cars through optional extras, eventhough 70% of consumers bought their carsstraight off dealer lots. A look at Japanese competi-tors suggested an alternative approach. By offering"fully loaded" cars with far fewer options, Japaneseautomakers enhance manufacturing efficiency, en-sure hetter availahility and faster delivery of specialorders, and reduce the risk of consumer confusionand disappointment. Chrysler is now offering feweroptions on each model in a much more consumer-focused product line.

Both organizations took control of their productlines in their own fashion. But a few general rulescan be drawn from their experiences. Following areeight directives that can help marketing managersimprove their product-line strategies.

Improve cost accounting. Study, in detail, the ab-solute and incremental costs associated with theproduction and distribution of each SKU from theheginning to the end of the value chain. Since eachSKU's costs will vary according to the volume andtiming of demand, reappraise the profitability ofeach SKU annually or more often in the case offashion-driven or high-technology products subjectto volatile demand patterns. In companies withseveral hundred SKUs, focus computerized track-ing systems on those items that cither fall outsidethe bounds of acceptable profitahility or are de-creasing in profitability. In addition, compare theincremental sales and costs associated with addinga new SKU with the lost sales and cost savings ofnot doing so.

Allocate resources to winners. Sometimes bud-get allocations undersupport new, up-and-comingSKUs and oversupport long-established SKUswhose appeal may be weakening. As a result, man-agers fail to maximize marginal products. On otheroccasions, new line extensions that appeal only tolight users may be allocated resources at the ex-pense of core items in the franchise. Using anaccurate activity-based cost-accounting systemcombined with an annual zero-based appraisal ofeach SKU will ensure a focused product line thatoptimizes the company's use of manufacturing ca-pacity, advertising and promotion dollars, sales-force time, and available retail space.

Research consumer behavior. Make an effort tolearn how consumers perceive and use each SKU.Core items often have a long-standing appeal to loy-al heavy users. Other items generally reinforce and

expand usage among existing customers. A compa-ny may need a third set of SKUs to attract new cus-tomers or to persuade multibrand users to huy fromthe same line more often. By carefully analyzingscanner panel data, managers can identify whichSKUs in a product line substitute for or comple-ment the core products. They can also use the datato explore price elasticities and how demand forone SKU decreases if the relative prices of otherSKUs decline.

It is also critical to look at hrand loyalty as a long-term behavior. Tracking panels can help companiesunderstand their customers' habits and patterns inusing their products. Then, companies can be sureto build and reinforce loyalty, as opposed to disrupt-ing it, when they introduce a new line extension.

Apply the line logic test. Every salespersonshould be able to state in one sentence the strategicrole that a given SKU plays in the product line.Likewise, the consumer should be able to under-stand quickly which SKU fits his or her needs.Mary Kay Cosmetics limits its product line toaround 223 SKUs to ensure that its beauty consul-tants, many of whom work part-time, can explaineach one clearly; no item is added unless the com-pany removes an existing SKU from the market. Bycontrast, the Avon product line has 1,500 SKUs, sothe company runs special promotions to focus itsdoor-to-door salespeople on certain items.

Coordinate marketing across the line. A complexproduct line can become more comprehensible tosalespeople, trade partners, and customers if otherelements of the marketing mix are coordinated.Consider pricing, for example. Adopting a standard

Focus on Popular Products

100%

50

25

Filler

Seasonal

Niche

Core

Filler

Seasonal

Niche

Core

Items in theSnackco line

Sales/olume


pricing policy for all SKUs, or at least groupingSKUs into price bands, is often preferable-albeit ata potential cost in lost margin-to pricing each SKUseparately. Consumers and retailers find consistentpricing across a product line clearer and more con-vincing. It also makes billing easier. Color codingstandard-sized packages is another way to help con-sumers discriminate quickly among SKUs or SKUsuhcatcgorics.

Work with channel partners. Set up multifunc-tional teams to screen new product ideas and ar-range in-storc testing with leading trade customersin order to research, in advance, the sales and costeffects of adding new SKUs to a line. Armed withthe test results, distributors can avoid the opportu-nity costs of stocking inventory and allocating shelfspace to slow-moving SKUs that they will have toremove later on. Manufacturer-trade relations willimprove as a result.

Expect product-line turnover. Foster a climate inwhich product-line deletions are not only acceptedbut also encouraged. Unfortunately, in many com-panies, removing an SKU is harder than introduc-ing a new one. This is true for a variety of reasons:managers may lack procedures to appraise eachSKU's profitability; they may lack confidence inthe potential of new items to add incremental sales;they may believe that an SKU should not be de-leted as long as some customers still buy it; theymay consider it important to be a full-line supplier;they may believe that implementing product-linechanges is harder and more expensive than chang-ing the other elements of the marketing mix; andthey may be lulled by the ease with which promo-tional allowances can be used to huy shelf spaceand thereby cover up for a weak SKU.

Manage deletions. Once unprofitable items arcidentified, determine whether these items can berestored to profitability ciuickly and easily. Will asimple design change or a harvest strategy of raisingprices and reducing marketing support do the trick?What about restricting distribution to regions orchannels where the item is in heavy demand, or con-solidating production of slow-moving items in a sin-


gle plant designed to produce short runs of multipleproducts? Can costs be reduced by subcontractingproduction to small copackers?

If none of those approaches restores profitability,develop a deletion plan that addresses customers'needs while managing costs. For example, custom-ers who are loyal to an item being deleted shouldbe directed toward a substitute product. To helpthis process, offer a coupon that discounts boththe item being deleted and the substitute. In somecases, managers may continue direct-mail deliveryof an item after it is withdrawn from retail chan-nels while customers are switched to remainingitems in the line.

The costs of deleting an item include raw-materi-al disposal, work in process, and inventories thatmay have to be marked down to current distribu-tors or moved through nontraditional channels,such as warehouse clubs. The deletion plan shouldaddress how to use resources, including manufac-turing capacity, freed up hy the deletion. In somecases, it may make sense to launch a line extensionas an existing item is removed.

The era of unrestrained line extensions is over.Improved cost-accounting systems permit manu-facturers and distributors to track more accuratelythe comparative profitability of SKUs and the in-crcmemal costs of complexity associated with ex-tending a product line. Increasingly powerful dis-tributors are emphasizing "category management"and seeking to develop closer relationships withsuppliers willing to organize their product lines tomaximize trade profitability as well as their own.Meanwhile, consumers balk at the vast array ofchoices and the lack of apparent logic in many man-ufacturers' product lines.

Managers who focus their product lines insteadof continually extending them can expand marginsand market share. A controlled approach alignsproducts and distribution systems with customerneeds, helps ensure repeat purchases, and createsstronger margins that can be reinvested in true cus-tomer value. ^

Reprint 94509

160 HARVARD BUSINESS REVIEW Septemher-Octobw 1994

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Extend Profits, Not Product Lines