Optimal Selection of Line Extensions: Incorporating Operational, Financial, and Marketing Constraints

Line extensions-variants of existing products with new appearances, functions, or forms-constitute a significant fraction of products launched each year. While line extensions typically share components with existing products, they can also cannibalize the demand of existing products. The choice of an appropriate set of line extensions is an important recurring issue for a firm and they must incorporate constraints that arise naturally from operational, financial, and marketing considerations, resulting in an analytically challenging optimization problem. We consider several variants of this problem, develop efficient heuristics that deliver near-optimal solutions, and derive a variety of interesting insights on the inherent tradeoffs in the selection of line extensions.

[1]  Sebastian K. Fixson,et al.  Modularity and Commonality Research: Past Developments and Future Opportunities , 2007, Concurr. Eng. Res. Appl..

[2]  G. Tellis,et al.  Research on Innovation: A Review and Agenda for Marketing Science , 2006 .

[3]  Edwin J. Nijssen,et al.  Success factors of line extensions of fast‐moving consumer goods , 1999 .

[4]  Wallace J. Hopp,et al.  Product Line Selection and Pricing with Modularity in Design , 2005, Manuf. Serv. Oper. Manag..

[5]  Roger Jianxin Jiao,et al.  Product family design and platform-based product development: a state-of-the-art review , 2007, J. Intell. Manuf..

[6]  Manoj Kumar Tiwari,et al.  A hybrid model of component sharing and platform modularity for optimal product family design , 2013 .

[7]  R. Winer,et al.  Optimal Product Line Design: Genetic Algorithm Approach to Mitigate Cannibalization , 2006 .

[8]  Jayashankar M. Swaminathan,et al.  Product Line Design with Component Commonality and Cost-Reduction Effort , 2006, Manuf. Serv. Oper. Manag..

[9]  Marc H. Meyer,et al.  The Power of Product Platforms , 1997 .

[10]  Charlotte H. Mason,et al.  An approach for identifying cannibalization within product line extensions and multi-brand strategies , 1994 .

[11]  David S. Johnson,et al.  Computers and Intractability: A Guide to the Theory of NP-Completeness , 1978 .

[12]  Mustafa Uzumeri,et al.  Managing Product Families , 1996 .

[13]  Laurence A. Wolsey,et al.  Integer and Combinatorial Optimization , 1988 .

[14]  Zeger Degraeve,et al.  Analysis of an industrial component commonality problem , 2008, Eur. J. Oper. Res..

[15]  Saurabh Gupta,et al.  INTEGRATED COMPONENT AND SUPPLIER SELECTION FOR A PRODUCT FAMILY , 1999 .

[16]  Serguei Netessine,et al.  Product Line Design and Production Technology , 2007 .

[17]  S. Ghose,et al.  Reciprocal Spillover Effects: A Strategic Benefit of Brand Extensions , 2003 .

[18]  Fabrizio Salvador,et al.  Toward a Product System Modularity Construct: Literature Review and Reconceptualization , 2007, IEEE Transactions on Engineering Management.

[19]  Thorsten Blecker,et al.  The Development of a Component Commonality Metric for Mass Customization , 2007, IEEE Transactions on Engineering Management.

[20]  Juliana Hsuan Mikkola,et al.  Managing modularity of product architectures: toward an integrated theory , 2003, IEEE Trans. Engineering Management.

[21]  Michael R. Ward,et al.  'Branded Generics' as a Strategy to Limit Cannibalization of Pharmaceutical Markets , 2005 .

[22]  Srinivas K. Reddy,et al.  To Extend or Not to Extend: Success Determinants of Line Extensions , 1994 .

[23]  Kamalini Ramdas.  MANAGING PRODUCT VARIETY: AN INTEGRATIVE REVIEW AND RESEARCH DIRECTIONS , 2003 .

[24]  John A. Quelch,et al.  Brands Versus Private Labels: Fighting to Win , 1996 .

[25]  Laurence A. Wolsey,et al.  Integer and Combinatorial Optimization , 1988, Wiley interscience series in discrete mathematics and optimization.

[26]  James M. Utterback,et al.  The product family and the dynamics of core capability , 1992 .

[27]  Eva Labro,et al.  The Cost Effects of Component Commonality: A Literature Review Through a Management-Accounting Lens , 2004, Manuf. Serv. Oper. Manag..

[28]  John L Mariotti.  The complexity crisis , 2007 .

[29]  Ron Sanchez,et al.  Real‐time Market Research , 1993 .

[30]  K. Ulrich,et al.  Planning for Product Platforms , 1998 .

[31]  Kamalini Ramdas,et al.  Special Issue on Design and Development: A Cross-Functional Approach to Evaluating Multiple Line Extensions for Assembled Products , 2001, Manag. Sci..