Product line additions

Assisng Product Line Additions:

Managers must identify the situations in which variety is an important competitive variable, examine the relationship between variety and cost, understand the underlying determinants of cannibalization and complementary, and asses the consequences of not responding to competitive innovations.

Conjoint analysis is useful for managers who evaluate new product line components. By allowing managers to identify the mix of attributes that is most likely to achieve market acceptance, these techniques provide good estimates of the probabilities for success of new items.

When a product line expansion is considered, it is important to realize the significant financial investments or incremental recurring costs.

Decision Model:

New products are treated as capital budgeting exercises where financial worth is evaluated by calculating the stream of future earnings from the new product.

When a new product represents an addition to a firms product...