When Do Upward Product Line Extensions Help Overall Revenue?
(A2020-63263)

AUTHORS

Jihoon Cho, Kansas State University; Swinder Janda, Kansas State University

KEYWORDS

Line extension; Product portfolio management; Causal effect

ABSTRACT

Firms have been committed to upward product line extensions to achieve gains in brand evaluations and in overall demand. Despite the prevalence of such extensions, previous research has provided little empirical guidance about how upward line extensions substitute for and complement the firm's offerings. To fill this research gap, this study looks at the effects of upwardly extended substitute and complementary products on the firm's revenue from existing primary offerings, utilizing a quasi-experiment to compare customer purchases across the pre- and post-launch of upward line extensions. Contrary to previous research, our results reveal that an upward line extension, if positioned as a substitute, significantly cannibalizes the firm's revenue from existing primary offerings. However, when an upward line extension is positioned as a complement to the existing offering, it helps drive an increase in revenue for the existing offering.