The Hidden Downsides of Excessive Line Extensions Your CPG Brand Needs to Know
Line extensions are the most popular tool in a CPG brand’s sales-generating arsenal. You’re simply adding a SKU or two to your product offering. And these new SKUs have the same basic benefits and branding as the rest of your shelf set. Take potato chips. Salt and vinegar, barbeque, sour cream and onion — these are flavor line extensions for potato chip brands we all recognize.
Why are line extensions the go-to tactic? Put simply, it’s because newness sells. Variety is the spice of life.
Launching new versions of existing products with on-trend ingredients, flavors, fragrances, boosters, supplements, etc., is attractive to sales teams, appealing to retailers, and engaging to consumers.
Or so you think.
Three Reasons Too Many Line Extensions Aren’t Doing Your CPG Any Favors
In reality, excessive line proliferation doesn’t come with those benefits. In fact, it can weaken the strength of large CPG brands like yours. Consider the downsides of too many line extensions before you go flavor crazy.
1. You Won’t Attract New Customers Without Added Benefits
Unfortunately, there’s no hard and fast rule for how many SKUs you should have on-shelf at any given time. It’s largely dependent on your food and beverage brand’s category.
What’s important to realize is that, even in categories that lend themselves to lots of SKUs, you’ll reach a limit where additions are no longer effective. They won’t garner more attention or revenue.
Ice cream, for instance, is a category with tons of line extensions. It makes sense. People enjoy different flavors. Baskin Robbins, in their advertising, famously offers 31 ice cream flavors. But you won’t find all the flavors in any one store (maybe 12-16), and they own the store. That tells you how much variety they think their consumers need at any one time.
Some ice cream brands that distribute through supermarkets seem to push for distribution of marginal extra flavors. Blue Bell and Dreyer’s for example have a flavor heavy line up in the freezer aisle. But here’s the catch. Adding extra flavors is unlikely to bring in extra dollars or new users. Sure, existing customers might try one of the new flavors instead of going for their usual. But that’s a sales swap — one product for another, mint chocolate chip for birthday cake — not additional revenue.
What’s more, those brands haven’t created any new benefits with their line extensions. The brands are known for variety already. It’s not the same as offering a Lactose Free or Non-Dairy or Plant Based offering or an Ice Cream Cake/Dessert that might attract new users or new usage.Therefore, they’re not drawing any new customers into the franchise.
2. Your Sales Velocity and Retailer Relationships Could Diminish
When it comes to product sales, velocity refers to how much of a particular item is sold over a certain period of time. As you’re probably painfully aware, retailers measure velocity religiously.
If you have too many SKUs (aka too many line extensions), some are bound to sit on the shelf. Consumers will stick with their go-to flavors. And when one of your products doesn’t move well, your brand’s average velocity will decrease.
A poor velocity can degrade your relationship with the retailer. They won’t be pleased you can’t sell the items they’ve given you the shelf space to sell. If you’re on bad terms with certain stores, you can say goodbye to your A+ shopper marketing game.
3. Line Extensions Have the Power to Dilute Your Brand’s Core Benefit
If at this point your velocity keeps dropping, your retail partners aren’t happy, and you’re not bringing in new customers to your company, it’s more than safe to say line extensions are doing damage to your CPG brand.
In fact, even your most loyal existing customers might not be able to discern your core brand benefit in the vast sea of product variety. Do all of those added flavors or fragrances or whatever really represent your brand? Looking at Health and Personal Products, do the leading brands in shampoo, conditioner and men’s body wash need to promote such a vast array of hair problems and benefits or bold fragrance imagery to sell product varieties that are essentially the same?
Herein lies the ultimate problem with excessive line extensions. They dilute that core brand benefit and, as a result, your CPG brand as a whole. And frankly, it can be tough to come back from such a weakened state in the market’s perception.
Four Tips for Tasteful and Timely Line Extensions
Despite their potential downsides, line extensions are a permanent and popular feature of the product sales and marketing playbook for a reason. All categories need variety, and you can leverage line extensions to maintain momentum in the periods between significant technology or performance leaps.
To avoid the negative outcomes of line extensions, don’t attempt them all of the time. When you do release a line extension, make it truly special. Here are some tips:
1. Make Your Line Extensions a Limited Time Offer
An LTO has the power to mobilize consumers because they understand they won’t be able to get your new product variety forever. And mobilized consumers mean a burst of sales for your brand.
2. Create Special Packaging So New Varieties Stand Out
Don’t put out a new flavor in the same old packaging. Consumers will walk right by. Instead, create a special packaging design for any line extensions you release.
3. Take Advantage of Cause Marketing
Linking a line extension to a certain cause can also encourage consumers to purchase your new product. If the message behind the special item(s) reflects positively on the brand, then any dilution of offering too many SKUs is short-lived. On the contrary, the sales increase and the visibility benefits the brand.
4. Do Seasonal Flavors Right
Almost every CPG brand reveals Autumn and Christmas flavors as line extensions. Seasonal line extensions are actually smart. They can leverage the urgency we talked about earlier. But try to tap into seasons or occasions that aren’t overdone. What’s going on in the spring that you can take advantage of? How about a Halloween flavor? See what fits with your brand that isn’t cliche.
Balance Line Extensions with Meaningful Product Improvements
Line extensions are necessary. But, as mentioned, they should only be done in the periods between significant technology or performance leaps — not as the default. And certainly not if a certain new SKU isn’t gaining traction.
Translation: Your CPG brand also needs to expand in ways beyond line extensions.
Expanding in other ways might look like expanding up (adding a benefit or upscaling an offering) or out (moving into a new category). No matter how you look to expand, long-term success relies on delivering product benefit improvements at regular intervals alongside well-timed, interesting line extensions.