| The product line extension strategy has always been highly valued in the development of enterprises,which is closely related to the effective operation within and the competition between enterprises.However,facing the emerging new business phenomena and operating modes in the digital context,some traditional business phenomena have gradually been broken.The most typical characteristics of new business phenomena include: consumer heterogeneity and need for uniqueness,so enterprises try to enrich and expand product lines to attract more consumers.In addition,with the development of internet and platform economy,enterprises are increasingly managing,encouraging and maintaining consumer-generated content(e.g.,online word-of-mouth,online brand communities).By combing through the relevant literature on product line extension published in the past three decades,it can be found that scholars have conducted a large number of studies on the impact of product line extension strategy on traditional enterprise performance.However,few studies explore the impacts of product line extension strategies on new performance in the digital context.Existing literature suggests that,positive consumer-generated content has profound implications for the development of enterprises,and platform competitive advantages.Therefore,for enterprises in the internet era,it is of great significance to clarify the impact of product line extension strategy and understand the role of product line strategy more comprehensively,scientifically design the optimal product line extension strategy,which is of great significance for enriching relevant theoretical research and promoting the efficient and sustainable development of enterprises.Although,in practice,the product line extension strategies are constantly enriched,while in academic,research on product line extension is insufficient and scattered.In general,following issues are needed to analyze: First,from the level of consumer behavior,existing studies have focused on the relationship between product line extension on traditional performance indicators,such as sales,profits,and market share.However,few studies have analyzed the impact of product line extension on digital performance(e.g.,online consumer word-of-mouth).Second,from the level of marketing-mix tools,existing research has found that different marketing-mix tools have different characteristics and will have a differentiated impact on sales.As one of the strategic decisions of enterprises,most of the current research focuses on exploring the impact of product line extension strategy on pricing,inventory and market competition success rate,with product line extension strategy as an explanatory variable.While few studies have explored its interaction effect with different marketing tools and its differentiated impact on its effectiveness.Third,existing literature related to product line extension mostly focuses on one or two product line extension strategies,and is limited to the overall level of product line extension strategies(e.g.,product line width or product line complexity).In fact,when enterprises design corresponding extension strategies,most scenarios are not limited to implementing only one product line extension strategy,but multiple extension strategies.Therefore,the conclusions drawn in the existing research may still have certain deviations in the process of guiding practice.Based on the above practical background and theoretical gaps,our paper is based on product line extension strategy,starting from the above three levels,the level of consumer behavior,the level of marketing-mix tool,and performance.We conduct empirical analysis around the following research topics:(1)How does product line extension strategy impact consumer-generated content(e.g.,online word-of-mouth valence and online word-of-mouth variance)in the digital age? What are the potential mechanisms for the main effects?(2)Does product line extension strategy have a differentiated impact on the effectiveness of different marketing tools(e.g.,advertising and WOM)? and its intrinsic explanatory mechanism.And,in order to better depict the real situation of the enterprise,how will the product line extension strategy affect the performance of the enterprise at different levels?(3)Specifically,how does extending product line complexity strategy affect sales and production costs(manufacturer level)and online WOM(consumer level)?(4)Further,our paper divides the extension from product line complexity into the core attribute(primary attribute,such as engine)of the product line complexity and the peripheral attribute(secondary attribute,such as color)of the product line complexity,according to different attributes of the product line,and analyze the moderate effects of the two different extension strategies on the main effect.In response to the above questions,Study 1(Chapter 4 of the main text)explored the impact of product line length on online word-of-mouth(WOM),based on the Accessibility-Diagnosticity theory and Mismatch theory,and use the automobile industry data of 50 vehicle models in China,the results suggest that,with the increasing of product line length,the WOM valence decreases and the WOM variance increases.Moreover,the intensity of advertising expenditure moderates the impacts of product line length on online WOM.Specifically,with the increases in advertising expenditure,the(absolute value)of the negative impacts of product line length on the WOM valence will be smaller,and the positive impacts of product line length on the WOM variance will be also smaller.These findings are robust to a series of alternative specifications such as solving the endogeneity of the product line length,changing the measurement of the product line length,considering the long-term effects of advertising,and expanding the model sample and diversifying advertising types(traditional advertising and social media advertising).This study extends the literature on product line extension and consumer WOM,and provides a new perspective for firms to design product line length and manage consumer WOM.Study 2(Chapter 5 of the main text)uses the Information effect & Persuasive effect theory,explores the impact of product line extension on the effectiveness of different marketing mix tools(advertising and online word-of-mouth).Using the automobile industry data of 50 vehicle models,the results suggest that the impacts of product line length on firm advertising and on consumer WOM effectiveness are in opposite directions.When product line breadth increases,the effectiveness of advertising on vehicle sales is reduced,while the effectiveness of WOM is enhanced.Moreover,we found that the mismatch cost between firms and consumers mediated the relationship between product-line breadth and the effectiveness of advertising,but did not mediate the relationship between product-line breadth and the effectiveness of consumer WOM.Furthermore,we used our parameter estimates to quantitatively illustrate the trade-off between firm advertising and consumer WOM in driving product sales when firms’ product line length changes.While adding to the research on the impacts of firms’ product-line strategies,our paper also contributes to the literature on marketing communications,especially to the research on the difference between marketer-generated content(MGC,e.g.,advertising)and user-generated content(UGC,e.g.,consumer WOM).Study 3 starts from the Construal Level Theory and Prospect Theory,introduces the moderator effect of product line complexity,and extends the complexity from different product attributes base on the level of manufacturers and consumers,attributes are divided into core attributes and peripheral attributes.Similarity,we also use the data from Chinese automobile market,explore the impact of product line extension strategy and the impact of extending from different attributes(core vs.peripheral attributes)on sales,production costs,and consumer online word-of-mouth.The robust results suggest that product line extension will positively promote the sales,but has a negative impact on consumer online WOM.By using a questionnaire method for pre-test,consider the product line extension from two different attributes,First,extending the product line complexity from the core attributes will weaken the positive impact of the product line extension on sales,while extending the product line complexity from the peripheral attributes will strengthen the positive impact of the product line extension on sales;Second,extending the product line from the core attributes will strengthen the positive impact of product line extension on production costs,while extending the product line from the peripheral attributes will weaken the positive impact of product line extension on production costs;Third,extending the product line from core attributes will also strengthen the negative impact of product line extension on online word-of-mouth,while extending the product line from peripheral attributes will slow down the negative impact of product line extension on online word-of-mouth.The empirical results of this research explain the inconsistencies in the previous research on the product line length and product line complexity extension,and provide an important reference for enterprises to design reasonable product line portfolio strategies.Overall,the contributions in this paper are as follows:First,this paper expands the understanding of product line extension strategy and enriches the relevant theoretical literature of product line extension in the automotive market.Product line extension is an important decision-making factor for the survival and development of enterprises,and it is also the main means of competition between enterprises,which is related to the economic transformation and sustainable development of enterprises.On the one hand,existing literature on product line extension mostly focuses on the relationship between product line extension and traditional performance indicators related to enterprises,such as sales,performance,service quality,and mismatch cost.Using the automobile industry as the context,empirical testing reveals that a specific product line strategy,such as a relatively simple model style quantity design,is more conducive to the formation and maintenance of an active online review ecosystem,thereby enriching relevant theoretical research.On the other hand,our paper also explores the interaction effect between product line extension strategy and different marketing mix tools,and verifies the different impacts and internal interpretation mechanism of product line extension on the effectiveness of advertising and online WOM.Moreover,in view of the three situations that may be faced in practice: narrow product line length,average product line length and wide product line length,our paper also proposes reasonable advertising investment and online review management strategies.Second,the impact of product line extension strategy is more comprehensively explored,which makes the research framework related to product line extension more complete.Previous empirical studies on product line extensions are still dominated by their positive impact or the inverted U-shaped nonlinear impact.In the first study,our paper explores and verifies a negative effect of product line extension,which helps academics and business managers in automotive market consider the role of product lines more comprehensively when designing product lines.In the second study,the empirical results of found that after considering diverse marketing-mix tools,the product line extension strategy would differentially affect the effectiveness of advertising and consumer WOM,as reflected in the fact that the effectiveness of advertising would decrease with the wider product line extension,while the effectiveness of consumer WOM would still increase.The underlying mechanism is inseparable from the relevant characteristics of the automobile industry: first,vehicle consumption is still to some extent hedonistic consumption,and consumers value the process of vehicle buying experience more in the selection process.Second,there is a certain heterogeneity of price,cost and function among different brands and models,which requires consumers to update their expertise for decision making,but the overload of expertise learning and time cost will also inevitably deplete consumer satisfaction.Therefore,when making decisions on product line extensions,automakers should not make the wider the product line the more beneficial it is,but instead,they should also take into account the possible negative effects of extending it too wide in order to make a reasonable decision.In addition,the findings of this paper are also of theoretical value and strategic significance to the electronics industry,such as the telephone market and the computer market.Third,to some extent,this paper breaks through the monolithic product line extension dimension of existing studies.In the existing literature on product line extension,most of them only analyze the product line length(breadth)or product line complexity in a single dimension.This study starts from the phenomenological level and,with the help of a questionnaire pre-survey,divides the extension of product line complexity into two differentiated extensions according to different attributes(extension from core attributes and extension from peripheral attributes),and analyzes the interaction effects with these two extensions.Moreover,firm performance includes three dimensions: sales,production cost,and consumer online word-of-mouth.Thus,the research model better depicts a complete framework,the real situation and the conclusions can provide more effective practical insights.Finally,this paper enriches and deepens the understanding of the factors influencing marketing tools such as advertising investment and online WOM.Product line extensions affect the online ratings of their corresponding products,and a dedicated product line strategy is more conducive to the formation and maintenance of a positive word-of-mouth image for a company than a broader product line.On the one hand,previous studies have focused on rating products,rater characteristics,rater social relationships,and rater scenarios in terms of how companies and products form and maintain good word-of-mouth,but this paper considers the role of product line extensions from the corporate decision-making level.Compared with rater characteristics,rater social relations,and rater scenarios,product line design is a more controllable factor,especially in the automotive market where product line competition is the main means of competition among companies.On the other hand,with the deep development of mobile Internet and platform economy,the proportion and effectiveness of traditional advertising is gradually reduced,and the importance of online reviews is obviously.With the development of platform economy and online technology,some enterprises have even developed marketing campaigns with online reviews,i.e.,relying on interactions among consumers to generate more favorable and influential word-of-mouth.The results of this study suggest that in addition to the marketing strategies described above,companies should also focus on traditional decision factors such as product line.These factors are also important in influencing online reviews,and a well-designed product line can save money and improve efficiency compared to developing core technologies to improve product quality or implementing strategies such as “cashback” to optimize online reviews,thus providing a more effective and sustainable development and competitive advantage.This can provide more support for efficient and sustainable growth and competitive advantage.Of course,the conclusion of this paper also emphasizes the role and effectiveness of advertising investment.Although product line extension has a negative impact on online reviews,it does not mean that product line should never be expanded to achieve good word-of-mouth.Our paper organizes from the perspectives of marketing and operation management,expands the related research of product line.Moreover,provides new mechanisms and perspectives for corporate decision makers to rationally design product lines and management,and enhances online reviews and other marketing tools,which enrich existing theoretical research.In addition,the research conclusions of this paper have certain reference significance and reference value for the formulation of strategies for corporate decision-makers. |
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