Product proliferation refers to a situation that arises when a specific organization markets almost similar products but introduces slight variations to increase its market share (Berman, 2010). These products are only differentiated through aspects like color, shape and product size. Product proliferation has both positive and negative effects with regard to the market.
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One of the strategies employed by companies that adopt product proliferation is a broad product line, which is perceived to translate to increased overall demand. Secondly, an extensive product line in relation to supply has been known to affect the market through increased costs. Lastly, an extended product line, especially by large scale manufacturers, mostly deters other players from joining the market. This will translate to increased prices by the incumbent firm (Barnett and Freeman, 2001).
Although there is no clear-cut study that has been done to assess the three aspects given above empirically, it is crucial to mention that it has been suggested from previous studies that product proliferation strategies have no uni-dimensional explanation in relation to decision making as product proliferation has an impact on both demand (market share) and supply (price).
The market outcome is determined in terms of product proliferation by competitive structural factors that influence product line decisions in a firm (Bayus, 1999). Product proliferation is used as a means to curb rivalry within an industry as competition is based on product differentiation rather than price.
Product proliferation facilitates competitiveness, which is based on perceived uniqueness of the product, quality and lastly performance of the product. Some critiques argue that product proliferation has led to wastage of resources as it works well when there is a boom in the market. When a recession hits, even powerful companies experience major stability problems. This is directly linked to excessive investment costs.
Most car makers churn out various models of vehicles, a practice that has led to immense competition between car makers. This has translated to increased demand for iron and aluminum which are the raw materials for the automobile manufacturing industry. To reduce cannibalization of these products, there is a need to intuitively target the changing customer needs by building a full contact through watching and questioning those creative market segment.
The other aspect of minimizing cannibalization of products is by coming up with ways of out-innovating other competitors by expanding the product line.
This comes in the way manufacturers plan their innovation to incrementally change to capitalize maximally on previous developments and modern ones to absorb common parts and other components that would otherwise go to waste. The other means through which cannibalization of products by product proliferation can be reduced is by critically adopting the continuous improvement approach.
Many traditional industries are known to instinctively operate within quad rum of pure quality concerning cost model, where any slight modification in design, quality or even features will translate into increased prices. Most prestigious car manufacturers have adopted this model of trade-off curve like BMW and Mercedes-Benz brands. In more than one way, product proliferation leads to wastage of economic resources
Product proliferation has gained momentum with the rise of a middle-class section of the population, which is the main proponent of consumerism. This middle-class mentality is centered on getting custom-designed products that are affordable and act as a source of prestige. This is worsened by established businesses which have a culture of demanding for private brands or labels which are mostly put in display and promotional packs.
This has been made easy by the rise of globalization where products must adhere to specific requirements such as labels that are translated in different languages. Other negative aspects arise with product proliferation. For instance, due to its dynamism, it is practically impossible to manage product proliferation. In recent times, most of the large scale manufacturers have resulted in pruning their products rather than coming up with new ones.
What this means to those manufacturers coming into the market is that they cannot compete as the veteran companies will determine the prices of products that are offered in a particular industry. This is made complex by the unpredictable change of the landscape of consumer demands. As new consumer demand rise so will the companies attempt to meet these demands and maintain the existing market share.
Measures Associated With Product Proliferation
Capacity control emanates from industry players producing too much output to caution against making tremendous losses, and manufacturers result from cutting on prices. Other players respond similarly and reduce their prices causing a price war.
Although excessive production may result from too much output from manufacturers other factors like a shortfall in demand due to a recession may also cause excessive output in the market. Paradoxically, the effort of each industry players to outperform the other results in overcapacity which bites them all.
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Design as a Strategy
Design as a strategy has been adopted as a means towards enhancing product proliferation in a market; one of the latest companies to take this strategy is Thomson Consumer Electronics (TCE). The company is a manufacturer of different brands of TV sets. As noted by Aguirregabiria and Mira, (2007), design as a strategy entails aspects such as the product’s feel, look, touch, and ergonomics.
For many manufacturers, the design is not merely cosmetics add-ons, but a corporate identity that separates them from other manufacturers. A company’s product design is synonymous with the quality of the product. The design has been used by various companies like house furnishing where it acts as the company label or the brand. Design goes beyond styling. It conveys quality and also improves margins.
There are various enhancements that design puts on a product. One is the aesthetic quality which causes appeal of a product; the design also increases the safety of a product making it pleasing to touch and use. Thirdly, the design ensures a product is easy to operate, clean, handle and install. The most crucial aspect of the design is that it should be economical to manufacture and also recycle (Aguirregabiria and Mira, 2007).
Innovation as a Strategy
Innovation serves as the basis for product proliferation as it curves a niche for a company and places it as a guru in industrial breakthrough.
Some of the companies that have come up with unique innovations in recent times include companies such as Apple which came up with the icon-based personal computer; Michelin came up with its radial tire, Pilkington which also came up with the floating glass process. All these innovations have placed their companies in great heights. Innovation as a strategy is challenging to maintain and thus very risky. Most companies see innovation as not a sustainable competitive strategy.
This has translated to increased product proliferation as there are no new products, but the only modification of the previous inventions. It is critical to mention that the period sustained by new design roughly translates to how fruitful one’s venture will be in the form of profit as the market becomes an oligopoly. This consistency of being always on the lead ensures a loyal customer base.
Innovation in product proliferation takes two distinctive approaches, either by nature and trust, where innovation trickles from management downwards, or it may be characterized by innovation rising from bottom-up. The bottom-up approach originates from the workers, and their suggestions are passed through the organizational hierarchy to the management.
This approach has been hailed by Bayus and Putsis (1999) as it promotes ownership of the innovation which further translates to success as far as market penetration and future product success is concerned. This means that innovation is spontaneous throughout the organization.
Service as a Strategy
Lastly, in product proliferation, service as a strategy translates to how much a company will succeed than the other. Most manufacturers do not consider service as being important. Generally, it is the product that receives much attention since it’s a source of competitive advantage.
Service, on the other hand, is seen as a necessity that is incurred, rather than an added value. In product proliferation, there is an immense need to have an efficient and sufficient service delivery since there are various similar products in the offing. It is estimated that companies lose 15-20% of their customers on an annual basis.
Now for a market that is oversupplied, there is a need to keep a strong customer base, and this can only be achieved through customer satisfaction. Swift and effective handling of complains and inquiries together with friendly customer approach will always keep customers coming back.
Aguirregabiria, V. and Mira, P. 2007. Sequential Estimation of Dynamic Discrete Games. Econometrica, 75 (1) Pp.1–53. Web.
Barnett, W., P., and Freeman, J. 2001. Too Much of a Good Thing? Product Proliferation and Organizational Failure. Organization Science. 12(5). Pp. 539-558. Web.
Bayus, B., L., and Putsis, W., P. 1999. Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes. Marketing Science. 18(2) Pp. 137–153. Web.
Berman, B. 2010. Products, Products Everywhere: Do companies really need to sell so many varieties of similar goods? No. Wall Street Journal. Issue. Web.