Line extensions occur when a company introduces additional items in the same product category under the same brand name such as new flavors, forms, colors, added ingredients, package sizes.
Vertical extensions consist of increasing and decreasing the quality and price to create inferior and luxury goods.
[2] Product line extensions help companies identify and tend to the needs of refined target markets.
The new addition could also send confusion to the company's customer base, and in turn negatively affect the loyalty they have for the brand.
[3] An advantage of extending company product lines is the likely rise in sales, demand and market share.
For example, Walmart is widely known for its low prices and availability, so this consumer image of the brand would not impact the company negatively.
So while demand and increased market share may be a positive to downward line extensions, the approach may disadvantage the brands overall profit.
[5] Companies may wish to enter the high end of the market for more growth, target returning customers,[1] higher margins, or simply to position themselves as full-line manufacturers.
Many markets have spawned surprising upscale segments: Starbucks in coffee, Häagen-Dazs in ice cream and Evian in bottled water.
Leading Japanese auto companies have each introduced an upscale automobile: Toyota's Lexus, Nissan's Infiniti, and Honda's Acura.
Brands can adjust pricing to coincide with trends within the economy, to ensure the luxury goods do not lose too much of their consumer demand within their most popular market segments.