5 Reasons To Expand Your Product Line (And How To Do It Right)

5 Reasons To Expand Your Product Line (And How To Do It Right)

Expanding your product line increases both your customer base and revenue. So, what’s stopping you?

According to a survey from the National Retail Federation, US shoppers prioritize convenience over many other factors when making a purchase.

Almost all the customers (9 out of 10) said they’d likely choose a retailer based on convenience. And a whopping 97% said they’ve previously backed out of a purchase when it became too much of a bother.

One way to give your customers a convenient buying experience is by expanding your product line. When they can find more of what they need in one place, they can rely on you more often (and have less reason to check out competitors).

However, adding SKUs to your product catalog is easier said than done. That said, it’s well worth your effort.

Below, you’ll learn about several strategic benefits of expanding your product line, plus the steps to do so without a hitch.

What is a product line, anyway?

Broadly speaking, a product line is when a single company markets and sells a group of products. Pretty simple, right?

Now, let’s get into the nitty-gritty of this definition. All of the SKUs in a product line have characteristics in common. Sometimes, they share a function or distribution channel. Other times, products might be connected through price or physical attributes (color, size, or shape).

Nike, Inc. is a great example of multiple product lines in action. Nike created separate product lines to cater to various sports, like track and field, basketball, and soccer.

And within each product line, customers can purchase everything from clothing to footwear to equipment for their go-to sport.

The global sneaker brand also boasts the Jordan product line, which is a collection of clothes, shoes, and accessories that all bear the iconic Jordan logo (as in basketball legend Michael Jordan).

This strategy has clearly worked out just fine for Nike—the company’s global revenue for 2022 surpassed $46 billion (an increase of more than $2 billion since 2021).

📝 Note: Many retailers expand their product catalog by adding to existing product lines that customers already know well. Adding to existing product lines is known as extending the product line length.

5 benefits of expanding your product line

We’ve only teased a few advantages of expanding your product line. Let’s unpack the biggest benefits retailers can expect when they extend their product lines.

1. Increase average order value (AOV)

Adding a new product line is a great way to increase the dollar amount your customers spend every time they hit up your website or app.

Known as average order value (AOV), this metric gives retailers into their customer’s buyer behavior (so they can make adjustments accordingly). And launching a new product line (or adding to an existing one) is one way to lift the overall value of each order.

This is especially the case when retailers combine shiny, new products with SKUs seeing sluggish sales in product bundles. Product bundling is when retailers sell more than one product as a combined package at a lower price than if the items were sold separately. With bundling, you can promote SKUs that aren’t selling as well by packaging them with complementary products from the same line (like when Caraway bundles its pots and pans).

Source: Caraway

Or, retailers can bundle items from different product lines—like The Body Shop’s annual advent calendar, which combines face masks, shower gels, and lotions in one purchase.

And while the advent calendar and set of pans cost less than buying these items individually (which is a great incentive for customers to buy), it’s still more than what they’d spend on 1 or 2 products in a single visit.

The same applies to new product lines. You can bundle new SKUs with bestsellers as a promo to introduce new products to customers. You can also use a LinkedIn email finder to reach out to and introduce the product to potential customers.

Or, if there’s plenty of buzz about your new products, pair them with struggling SKUs or dead stock. That way, you can turn over those slowsellers faster.

2. Increase revenue opportunities

When you have a small product catalog, all your revenue comes from just a handful of products. Those items have to sell really well to maintain your cash flow, and even your most loyal customers can only buy and use so much of any one thing.

But when you have a large catalog with multiple product categories, there’s less pressure on individual items to fly off the shelves. So, by giving customers more options, you’re also opening up opportunities for a lot more revenue.

Imagine if Starbucks limited its retail products to ground coffee—they wouldn’t take in near as much revenue as they do now, thanks to their diverse product lines.

Sure—today, Starbucks rakes in plenty of cash on fancy brewed beverages. But it also sells coffee- and tea-brewing equipment, mugs, accessories, packaged foods, music, books, and so on.

In addition to the flagship Starbucks Coffee brand, the company also has a plethora of other product lines under brands like Teavana, Seattle’s Best, and Starbucks Reserve. This product line expansion contributed heavily to Starbucks’ $26 billion global revenue for 2022.

3. Expand your customer base

Simply put, the more product lines you sell, the greater your chances of reaching more customers and growing market share as a result.

Think about it: When you sell only one product line, you’re limited to a niche corner of the market. And your target audience is restricted to shoppers looking for those specific items.

Take the burger chain White Castle, for example. For years, White Castle sold frozen sliders in grocery stores across the US. More recently, however, White Castle expanded their product lines to serve up veggie and black bean sliders too.

By continuing to reimagine and expand its product offerings, White Castle is now reaching a whole new customer base—one who values convenience but also follows a plant-based diet.

Because of this expansion, White Castle has become a bigger contender in the frozen food market and reached a market segment that otherwise might not have thought twice about their brand.

4. Get ahead of the competition

Adding SKUs to your catalog can help you cover a wide range of products and price points. This creates an inclusive shopping experience, giving you a leg up on your competitors.

📝 Note: Purchasing trends often change based on what’s happening with the economy. When inflation spikes (like it did in 2022), customers opt for more cost-effective options. And when the economy is booming and customers have more disposable income (like in 2020), they might splurge on more luxury options. An expanded product line better positions you for both economic landscapes.

For example, Procter & Gamble (P&G) has 65 individual brands that sell within the same 10 product lines. These product lines cover baby care, feminine care, fabric care, and hair care (just to name a few).

Source: Business Wire

Having such a diverse product portfolio has helped P&G gain an amazing competitive edge and become the biggest consumer goods company in the world. In 2022 alone, P&G raked in $80 billion in global net sales.

That said, luxury retailers might target a smaller audience due to higher product prices and exclusive nature. But these brands can still leverage product expansion to stay ahead of the competition.

Case in point: Luxury footwear label Marsèll announced plans to expand to the handbag and leather goods categories in 2023. This diversification will likely help the brand reach new audiences and make a name for itself in previously untapped markets.

For more context, the luxury footwear market hit revenues of $29 billion and is expected to grow another 4.07% YoY from 2023 to 2027. In contrast, the luxury handbag market was valued at $58 billion in 2018 and is projected to reach $89 billion by 2026.

Having a strong toehold in both the luxury footwear and handbag market means Marséll can target shoppers in both markets (allowing them to take more competitors in the luxury space head-on).

5. Maintain traction in the marketplace

Staying relevant in your market is a challenge all retailers face. But expanding your product line keeps you top of mind with customers and solidifies your growth with the market.

Nearly all retail products go through a four-phase life cycle, which includes:

  1. Launch: the product is introduced to consumers
  2. Growth: the product generates growing sales
  3. Maturity: the focus shifts to maintaining market share
  4. Decline: the product experiences reduced demand

In short, brands see a surge in sales during the launch and growth phases. But eventually, customer interest wanes, and sales slow down (or stop completely).

This decline can happen for all sorts of reasons, from changing trends and consumer attitudes to product obsolescence and growing competition. Like it or not, few products are immune from losing customer favor over time.

With that said, expanding your product line can help you maintain traction in the marketplace. As one product ends its lifecycle, another might hit its growth phase. So, rather than becoming obsolete, your brand continues to surprise and delight customers with new product offerings.

Do you remember Coca-Cola C2?

Launched in 2004, C2 was part of a low-calorie and low-carb product line. But it was marketed as a unique beverage that tastes like classic Coke.

From a big-picture standpoint, this new product was a flop for Coca-Cola—likely because it didn’t retain the full flavor of Coke, nor did it live up to customer expectations.

But just as C2 was on its way out in 2005, the company rolled out fan-favorite Coke Zero (recently rebranded as Coca-Cola Zero Sugar.

So, just as Coca-Cola saw the decline of one product, it simultaneously experienced the rise of another beverage that continues to earn healthy revenue today. Not only was Coca-Cola Zero Sugar the company’s biggest source of growth in 2021, but profits from Zero Sugar increased another 12% in 2022.

📝 Note: When you have multiple product lines, each line has its own identity. So, your business can still thrive even if something goes wrong with another line. That’s why the fallout with C2 didn’t take down Coca-Cola—the beverage giant already had a diverse product portfolio before C2’s launch.

How to expand your product line successfully

A successful product line expansion requires intentional market research, thoughtful product development, and an optimized pricing strategy to make it work.

Conduct market research

As tempting as it is to dive head-first into product expansion, take your time and do your homework. This means conducting proper market research (so your launch is as profitable and impactful as possible).

Not only can market research give you invaluable insights into your potential buyers, but you’ll also better understand your target market and validate your ideas.

So, let’s get started. Your market research should include 3 phases.

1. Current market analysis

As the name suggests, a market analysis forces you to look hard at your current (or prospective) market. And for that, you’ll need plenty of data.

Dig into geographic and demographic info. Do some research on the size and value of your target market. Learn about the key players who are already succeeding and have the largest share of the market.

A deep understanding of the target market for your new product line can help you hone in on:

  • Your target audience
  • Their buying patterns
  • Their product preferences

👉 Learn more about starting your market analysis.

2. Product and consumer demand analysis

You want to ensure there’s plenty of demand for your new product line. So, even if it cannibalizes sales from your older products, your total revenue will still increase.

When launching a new product (or an entirely new product line), there won’t be any historical sales data to analyze. Instead, you can look at historical data for your established product lines with the same price point, analyze data for a similar group of target customers, or review current reports for comparable product lines your competitors sell.

Another way to gauge the potential increases in demand is by asking your current customers.

For example, a customer satisfaction survey can tell you whether customers are craving something new and different. You can also get a sense of their interest by sending them details about a planned new product.

3. Competitor analysis

Assess the competition to look for any market gaps and learn from the successes or failures of other retail brands.

In many ways, expanding your product line is a chance to capitalize on a weakness in a competitor’s offering. Meaning, you can take advantage of the revenue they’ve left on the table.

👉 Learn more about conducting market research as a retailer.

Develop distinct products

Say there’s nothing to differentiate a new product line from an existing one. In this scenario, you may shift (or split) sales from one line to another rather than ramp up your overall revenue.

That’s why creating unique products is crucial rather than repackaging previous ideas. Distinct product lines encourage your customers to buy more (which increases revenue)—and might even attract new customers.

Here are a few ways you can create distinctive product lines of your own:

  • Design a product line that speaks to a different customer need.
    • Example: Suitcase brand >Away designing accessories like sleep masks and travel blankets
  • Create a totally unique product line that appeals to a new demographic.
    • Example: Glossier started as a skincare brand but eventually released a second product line for makeup>
  • Offer a premium product line that appeals to customers who aren’t budget-conscious.
  • Launch a limited-edition product line that enhances customer and brand loyalty.

Making your product line as unique as possible can help you stand out from the competition and prevent accidental product cannibalization (more on this in a second).

More than that, product expansion adds value for your customers because you’ve (hopefully) addressed another of their needs with your new product idea.

Improve your pricing strategy

Let’s face it: Pricing new products for an expanded line is tricky. But revamping your pricing strategy to balance your current product catalog is important.

Similar to what you did with your market research for demand, you can reference historical data for existing product lines geared toward the same audience—or check current data for comparable product lines competitors sell.

For example, Rhode Beauty could’ve set a high price and entered the luxury market because of the name recognition of its famous founder: Hailey Bieber.

However, Rhode went with lower prices to keep its quality products accessible. As a result, Rhode sold out of everything within hours of the brand’s launch.

While this approach isn’t an exact science, it still gives you a good idea of what customers will pay for your products (and it’s better than trying to price from scratch).

If you’re just guessing what new product lines should cost, you might end up pricing them too high and alienating customers in the process.

Alternatively, you can always run a price test to determine the ideal price point for your new items. This can be as simple as running an A/B test.

Just remember: It’s best to do this when products are newer before customers come to expect a certain price point.

Get ahead of cannibalization

In retail, product cannibalization is when a new product line displaces an existing one. That is, a newly released product eats away at the sales of an older product.

Typically, cannibalization occurs when your new product line:

  • Is too similar to an older line
  • Targets the same audience as an existing line
  • Is priced much lower than an older line

Whatever the reason, cannibalization can seriously hurt your company’s cash flow.

Let’s say you’ve overstocked an older product. And while you’re overstocked, you introduce a newer, less expensive version.

In this scenario, sales of the older product will likely slow, and any excess inventory will eventually become obsolete.

Not only does dead stock rack up extra carrying costs, but it also creates a lot of waste at your warehouse.

📝 Note: If you can clearly communicate what makes your new product line so special—and how it differs from your older lines—then customers can see the value in buying both. For instance, if your new skincare line caters to people with sensitive skin and serves as a perfect pairing for your existing non-comedogenic makeup line.

But cannibalization isn’t always all bad. You can actually leverage it to your brand’s advantage.

For instance, some retailers adopt an intentional cannibalization strategy, where they sunset an older product line as part of a new product’s launch strategy.

In 2007, at the height of the iPod’s popularity, Apple rolled out the iPhone, knowing it would render the iPod obsolete.

While sales of the iPod eventually vanished, this strategic cannibalization attracted tons of new customers. And it helped Apple stay ahead of competitors—a lead they’ve maintained ever since.

As of April 2022, the iPhone 13 was the most popular smartphone sold in the US, with 17% of total smartphone sales.

The biggest product line expansion challenges and how to overcome them

Despite the many benefits of product line expansion, you’ll inevitably encounter obstacles you’ll need to vault for your new line to be as profitable as possible.

Lack of inventory management support

Expanding your product line means wading through even more inventory data, order information, and shipping logistics. And without the right tools in place, inventory management can quickly become a nightmare.

That’s because as you launch more products, all your warehousing locations need to have optimal stock levels for each SKU. And depending on your sales channels, not every warehouse will need the same amount of inventory.

Some channels (like Amazon) have designated warehouses (FBA warehouses, for example). However, Instagram might share a fulfillment location with DTC orders, meaning that the warehouse has to have enough available inventory to support both.

Finding this balance can get tricky quickly. Fortunately, Cogsy’s multi-location support tool makes managing all your product lines across all your warehouses easier than ever.

Not only does Cogsy integrate with Shopify and Amazon to provide real-time visibility into your sales and stock levels, but it gives you more insight into what SKUs need replenishment, how much you should reorder, and when to place those purchase orders to get everything on time.

Along those same lines, if your current inventory management processes are clunky or disjointed, managing and organizing an even bigger product catalog will be tough.

Worse yet, if you manually update inventory data via Excel, you’ll encounter a lot more errors and inaccuracies in your reporting. These mistakes make it difficult to know when and what to replenish, which affects your inventory purchasing (and beyond).

So, you need the right ecommerce infrastructure to handle all the complexities that come with more product lines. Otherwise, you won’t be able to maintain accurate inventory records, adapt to changes in demand, or make the right replenishment decisions.

Take Cogsy, for example.

Cogsy’s actionable dashboard stores your real-time and historical data all within the same platform, so it’s accessible anytime. In fact, Cogsy monitors your data 24/7. That way, you’re always working with the most up-to-date inventory information—and you can respond to changes in demand faster than ever.

Poor demand forecasting

Demand forecasting anticipates how many products your customers will order by looking at historical data and buyer behavior. The most accurate forecasting also factors in how seasonality and supply chain disruptions might shift your demand projections.

But trying to forecast demand for a new product line can feel like taking a shot in the dark. Why? Because these new SKUs don’t have a sales history to base your forecasts around.

And the trouble is inaccurate demand forecasting translates to stockouts, overstocks, or hurt profit margins.

Thankfully, there’s a silver lining here.

With a tool like Cogsy, you can analyze historical data for existing product lines with the same price point (or audience) or reference current data for comparable competitor products.

Doing so will help you estimate your sales right out of the gate. And needless to say, this is a much better option than relying on guesswork and gut feelings.

With Cogsy’s new product planning feature, for instance, you can select products with similar characteristics and let Cogsy handle these demand calculations for you. What’s more, Cogsy will even factor in production lead time so you place every order at exactly the right time.

Little-to-no upfront inventory planning

Inventory planning is a huge part of your ecommerce operations and supply chain management. That’s because the best inventory planning leans on your demand forecasts to map out replenishment cycles.

So, you not only purchase the optimal amount of stock, but you do so at the ideal time. All while avoiding excess inventory and stockouts.

That said, inventory planning is time-consuming and prone to errors—especially if you do it manually. Not to mention that when consumer trends shift, and these plans get side swept, you can wonder what it was all for.

That’s why many small businesses lean on outdated inventory plans. Or they simply don’t bother planning their inventory at all.

But frankly, this is where that old cliché rings true: failing to plan means planning to fail.

Without a data-backed inventory plan, you’ll likely get stuck with too little inventory, too much, or stock at the wrong locations. All of which mean you can’t easily meet demand.

So, what can you do instead? Let Cogsy build your inventory plans on your behalf.

Cogsy can build inventory plans up to 12 months out with pinpoint precision. It’ll even factor in upcoming marketing events, product bundles, and supplier lead times for added accuracy.

Best part? It builds these plans in mere minutes (saving Shopify brands an average of 20 hours a week on inventory planning).

Then, whenever something changes (say, inflation hits and sales slow), Cogsy will adjust your plans accordingly, so you’re always working with the most up-to-date information.

Make smarter product plans with Cogsy

Getting ready to launch a new product (line)? Cogsy can help!

Before launch, Cogsy’s new product planning feature does the heavy lifting to determine how much of that new SKU you’ll need (and when). That way, you’re not stuck with excess inventory or stockouts straight out of the gate.

But Cogsy doesn’t stop there. The end-to-end purchasing tool keeps a 24/7 eye on all your SKUs (new and old).

If the tool spots an emerging sales trend (or possible cannibalization), it’ll automatically factor this insight into your inventory plan. This way, you always work with the most accurate inventory plans and can prepare accordingly.

And when you start running low? Cogsy’ll send you a handy replenish alert nudging you to restock. You can even streamline your purchase order workflow and improve your purchasing accuracy thanks to Cogsy’s handy restock recommendations.

Ready to take control of your inventory—no matter how big your product lines grow? Try Cogsy free for 14 days!

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Product line expansion FAQs

  • What are the two types of product line extensions?

    Product line extensions can be horizontal or vertical. Horizontal extensions revolve around maintaining the same price and product quality but changing things like ingredients or color options to differentiate the products. On the flip side, vertical extensions are when retailers increase or decrease price and quality to create cost-conscious options or luxury versions.

  • What is the difference between a product line and a product mix?

    A product line is a group of products marketed under a single brand name and sold by the same company. All products in a product line share things in common, like their distribution channel, price, or physical attributes. In contrast, a product mix is the total range of products a company offers (sometimes called product portfolio).

  • What are different product line strategies?

    First is product line length, which means adding new products to existing product lines. Second is product line modification, which enhances existing products by upgrading their size or packaging. Third is product line featuring, where product lines are given special promotional attention to boost customer interest or brand image.