Understanding Assortment Expandability and Saturation for Revenue Growth
Perhaps the only thing more staggering than the large number of new products each year is the small number that succeeds. Almost by definition, new products are expected to be expandable; they’re expected to grow, either by motivating consumers to try a product for the first time and/or to increase buy rate among current consumers.
But what makes a product expandable? And which factors are most important to consider when launching a new product? What is critical here is that expandable products drive retailer and manufacturer revenue, whereas contracted products do not.
Expandability depends on the relationship between consumer demand and product supply. High demand spaces call for greater assortment, but it’s important for marketers and retailers to be mindful of overcrowding the space, even if trends are strong. The most expandable products will be those that deliver new benefits or needs, or reach new consumers. Enhancing value in any of these ways is where innovation practitioners should focus.
Understanding Market Share and Overlap
Before exploring expandability, it’s important to understand how it works in concert with saturation. For example, a product may be expandable, but that does not guarantee market profitability. If the percent expandability is off a small base, it’s unlikely that the expansion will be successful. In a hypothetical milk example, 1% milk has a high market share but its sales have significant overlap with sales of 2% milk. That means that expansion will be far less successful than expansion in milk products that have less overlap.