One method is to introduce a new version of an existing product. Imagine, for example, a beverage company that has been making a particular soft drink for a hundred years: the soft drink is the company's most recognizable product, and it produces the associations and expectations that consumers have about the company itself. However, the soft drink is not popular with younger consumers because they have different expectations about how a good soft drink should taste. So the beverage company makes small changes in its ingredients and advertises the resulting product as the newest version of an old favourite. Of course, the company also still sells the old version of the soft drink for those who want it.
In another method, a well-known company capitalizes on its good name by selling a new but related type of product. For example, a manufacturer famous for making tough, long-lasting construction vehicles like tractors and bulldozers may introduce a line of work shoes or boots for construction workers.
In the third method, two or more companies form a partnership to make and sell a new product under a name that indicates that the product was made by both companies. For example, a company that makes chocolate may partner with a company that makes ice cream to create a new product, a chocolate-coated ice cream bar. Consumers who have already tried and enjoyed the ice cream by one company but have never tried the chocolate by the other are now exposed to the chocolate company's product, and they may be more likely in the future to buy products made by the chocolate company based on this good experience with the combination product.
All the methods of growing a company discussed in the reading involve risks or danger that can hurt a company in the long run. First, offering new versions of existing products may offend some long time consumers, like with soft drinks. If you introduce a new version that’s appealing to the new generation, the long-time consumers may start feeling old-fashioned if they’re still drinking the old version. But at the same time, they probably don’t like the new version. So they won’t buy the new version and they’ll stop buying the old version because that seems outdated. And that could mean a big decrease in sales overall. Second, introducing entire new lines of products can really backfire. It’s true that consumers may try a new product. It would work because the new product made by the company they like for the products it makes. But that’s because the products may represent certain qualities like the toughness. However, the fact that a company makes tough long-lasting tractors doesn’t mean that the boots it makes will have those same qualities. And unless the boots are good, the company will soon start getting a bad reputation. If that happens, not only will the boots fail in the marketplace, but the sales of its tractors may also decline. Third, partnerships are a good idea, as long as one partner doesn't start making the type of product that the other partner makes. Sure, it’s all nice in the beginning. One company makes the ice cream, the other makes the chocolate. Together they make the wonderful product that extends the popularity of both companies. But what if the chocolate company says one day, “Why not start making ice cream?” After all, consumers now associate their chocolate with ice cream. If this happens, the partner has become a competitor.
