Menu

Corporate Finance Institute

Log In

Get Started

Product Line
An array of related products under the same brand

Home › Resources › Knowledge › Other › Product Line

What is a Product Line?

A product line refers to an array of related products under the same brand. In other words, a
product line is a collection of similar products that are sold to customers.
 
 
Quick Summary:
 A product line is an array of related products.
 Products under a product line can be related by functionality, target market, price range, or
brand.
 Product line depth refers to the number of products offered under a product line.
 
Understanding Product Lines
Products under a product line are related either by functionality, target market, price range, or
brand. Although products in a product line are generally complementary to each other, that does
not need to be the case. For example, the product lines of a company may look as follows:
 
 
As shown above, ABC Company carries two product lines:
 Product Line 1 consists of products that are fruit-based; and
 Product Line 2 consists of products for sports activities.
 
Product Line Depth
When discussing product lines, it is important to understand the idea of “product line depth.” It
refers to the number of products offered under a product line.
 
 
For a product line, there is no ideal number for product line depth – a product line may consist of
a depth of five or nine and still be successful. However, maintaining a depth that is too low can
affect the availability of choices for customers, while keeping a depth that is too high can dilute
the brand perception of the product line and cannibalize sales. For example, consider two
scenarios:
 
1. Low Depth
A company may keep a fruit-based product line depth of two (two products under a product line)
consisting of a mango drink and a strawberry drink. A customer that prefers a grape drink may
not be a customer of the company due to the unavailability of such a product. It would limit the
addressable target market of the company and diminish sales.
 
2. High Depth
A company may keep a fruit-based product line depth of five (five products under a product line)
consisting of a mango drink, a strawberry drink, a guava drink, a grape drink, and a watermelon
drink. Keeping such an array of products may adversely impact a company if one product is
unpopular. For example, if it cost $100,000 to conduct research and development for a
watermelon drink but sales only amount to $5,000.
Therefore, there is a careful balance between the number of products that should be offered in a
product line. The ideal number of products to offer in a product line can be determined by
conducting market research.
 
To Add or Drop a Product Line?
Managerial accountants often conduct analysis on product lines to determine if they should be
dropped or not. Consider an auto manufacturer with the following profit and loss statement:
 

 
Assume that both sedans and coupes are produced in the same facility and, as such, rent expense
is allocated based on the amount of square footage used in the production of the respective
product lines. Should the sedan product line be dropped?
Looking at the bottom line (profit), an individual may assume that the sedans product line should
be dropped due to the -$30,000 in profit. However, in such cases, an individual should instead
compare the contribution margin to the avoidable fixed costs. For example, the sedans product
line shows a contribution margin of $570,000, and the fixed costs that could be saved if the
product line is to be discontinued are salaries of $400,000.
Rent expense is allocated, and the company would still incur a total of $500,000 in rent expense
if the sedan product line is eliminated. The following illustrates the profit of the company if the
sedans product line is eliminated:
 
 
Therefore, a decision to add or drop a product line should be based on the contribution margin
and avoidable fixed costs. If the company dropped the sedans product line, the company would
lose $177,000 in total profits.
 
Examples of Product Lines
When an individual goes into a Starbucks (NASDAQ: SBUX) shop, they are exposed to several
product lines offered by the company. For example, Starbucks may have product lines such as
coffee, tea, and snacks.
At a Nike (NYSE: NKE) store, product lines may consist of basketball, soccer, and golf. Under
each sport product line, there may be sub-product lines, such as footwear, clothing, and sporting
equipment.
 
Additional Resources
CFI is the official provider of the Financial Modeling and Valuation Analyst
(FMVA)™ certification program, designed to transform anyone into a world-class financial
analyst.
To keep learning and developing your knowledge of financial analysis, we highly recommend
the additional CFI resources below:
 Buyer Types
 Demographics
 Market Segmentation and Targeting
 Rent Expense
Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s

online financial modeling classes and training program!
Error! Filename not specified.

CFI logo
 Company
o About
o Meet Our Team
o Careers
o CFI Merch Store
o Student Reviews
o Affiliates
o For Teams
o For Universities
o CPE Credits Online
 Certifications
o Financial Modeling & Valuation Analyst (FMVA)®
o Commercial Banking & Credit Analyst (CBCA)™
o Capital Markets & Securities Analyst (CMSA)®
o Business Intelligence & Data Analyst (BIDA)™
o Commercial Real Estate Finance Specialist
o Environmental, Social & Governance (ESG) Specialization
 Courses
o Accounting
o Excel
o Finance
o Financial Modeling
o All Courses
 Support
o Financial Aid
o 1% Pledge
o Help | FAQ
o Contact Us
o Scholarships
 Resources
o Knowledge Library
o Templates
o Jobs & Careers
o Excel Skills
o eBooks

Logo

Logo

Logo
Logo

Error! Filename not specified.

© 2015 to 2021 CFI Education Inc.

Follow us on LinkedIn Follow us on Instagram Follow us on Facebook Follow us on YouTube

 Privacy Policy
 Terms of Use
 Terms of Service
 Legal


 NAVIGATE

 What is a product line? Definition and examples

 A product line is a group of products that a company creates under a single brand.
The products are similar and focus on the same market sector. Maybe their function
or channel distribution are the same or similar. Perhaps their physical attributes,
prices, quality, or type of customers are the same. We call the activity product
lining.

 A company can have more than one product line. The number of product lines it has
reflects its resources, i.e., how powerful it is.

 Product line numbers might also show the other players in the marketplace how
competitive the company is. In this context, the term ‘marketplace’ means the same
as ‘market’ in its abstract sense.


 Competitive advantage
 Marketing executives believe that product lines give companies a competitive
advantage. When a business has a competitive advantage, it has an edge over its
rivals.

 When a company has many product lines and groups them together, it creates
a product mix.
 Collins Dictionary has the following definition of the term:

 “A product line is a group of related products produced by one manufacturer. For

example, products that are intended to be used for similar purposes or to be sold in
similar types of shops.”


  

 If you have several products with something in common, you can put them into one
group. We call that group a product line. All the items must come from the


 Product line – marketing

 Product lines are often part of a marketing strategy. Companies keep adding more
products to attract buyers. Specifically, they want to attract buyers who are familiar
with the brand.

 A marketing strategy exists when you combine all your marketing goals and
objectives into one comprehensive plan.

 For example, a company that has a product line in grooming and hair care might add
a new line in personal care. A company that makes telecommunications software
may introduce a new app for tracking a cell phone. Customers who already know the
brand will be more willing to buy from their new line.

 In most companies, the Product Line Manager supervises a product line. This

person is in charge of determining what stays and what goes. In other words, which
products to get rid of and which ones to add to the range.

 Let’s imagine, for example, that John Doe Inc. seeks to reach out to new customers.
It may add more items to the line. We call this product line extension.

 Let’s suppose John Doe Inc. produces cookies. It may want to reach out to new
customers, so it adds sugar-free cookies to its line of products. It aims these new
cookies at consumers with diabetes.

 By doing this, John Doe Inc. will be extending its reach.

 Procter & Gamble (P&G) is a good example of a company with several product lines.
It has approximately 300 brands within its ten different product lines.

 P&G has product lines in Baby Care, Family Care, Feminine Care, Fabric Care,
Home Care, and Hair Care. It also has product lines in Personal Health Care,
Grooming, Oral Care, and Skin and Personal Care.



     



 No part of this website or any of its contents may be reproduced, copied, or modified, without
prior consent, unless otherwise indicated for stand-alone materials.
 View Non-AMP Version  Footer

http://www.squarepharma.com.bd/products-by-tradename.php

https://www.pranfoods.net/brands/beverages

https://www.coca-colacompany.com/brands

https://www.gillette.co.in/en-in/products

https://www.nescafe.com/our-coffees

https://www.marico.com/page/DigitalReport2018-2019/our-products.html imran

http://inceptavaccine.com/vaccines.php

https://www.mi.com/global/list/

https://www.colgate.com/en-us/products