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The Law of Line Extension – There Is an Irresistible Pressure to Extend the Equity of the Brand

If violating any of the laws of marketing was a punishable offense, a large portion of corporate America would be in jail.

By far the most violated law of marketing is the law of line extension. What’s even more diabolical is that line extension is a process that takes place continuously with almost no conscious effort on the part of the corporation. It’s like a closet or desk drawer that fills up with almost no effort on your part.

One day a company is tightly focused on a single product that is highly profitable. The next day the same company is spread thin over many products and is losing money.

Take IBM. Over the years, IBM has been a mainframe computer company that made a ton of money. Then they evolved into a b2b email lists usa company that had everything, midrange computers, personal computers, pen computers, workstations, software, networks, telephones, and of course professional services. They even tried to get in the home computer market with the PCjr.

Along the way, IBM spent millions on copiers (later sold to Kodak), Rolm (sold to Siemens), Satellite Business Systems (shut down), the Prodigy network (which evolved into an ESPN website and a Yahoo content portal), as well as software products including SAA, TopView, OfficeVision, and OS2.

In the early 2000s, IBM was close to collapsing under its own weight. It diversified, sold off, or closed down most of these product lines and focused on world wide professional services.

When a company becomes incredibly successful, it invariably plants the seeds for its future problems.

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Take Microsoft, without a doubt the most successful company in the software field. Microsoft has been heard to say it intended to aggressively seek the dominant share in every major software applications category in the personal computer field with a goal to have as much as a 70 percent share in every major software category.

Microsoft Corp has continued on its quest in line extension with online products (MSN), games (Xbox), and smart phones and mobile devices (Windows Mobile). Even with challengers in all these categories, as of 2008, MSFT had a global annual revenue over $60B with nearly 90,000 employees in 105 countries. It develops, manufactures, licenses, and supports a wide range of software products for computing devices.

However, there continues to be ominous signs of softness in Microsoft’s overall strategy.

Whom does that sound like – IBM? Microsoft is setting itself up for a collapse along the lines of IBM ten years earlier.

When you try to be all things to all people, you inevitably end up in trouble. “I’d rather be strong somewhere,” said one manager, “than weak everywhere.”

In a narrow sense, line extension involves taking the brand name of a successful product and putting it on a new product you plan to introduce.

It sounds so logical. But marketing is a battle of perception, not product.

There are as many ways to line extend as there are galaxies in the universe. And new ways get invented every day. In the long run and in the presence of serious competition, line extension almost never works.

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