Xerox was the number one company in copiers, and with a significant profit, they wanted to extend their company with the addition of a computer company. The computer company’s name is Scientific Data Systems. They have started advertising the company as “A machine which does not do copier.” Please remember this line so that we will understand the pain points of xerox. Xerox already has a successful product at this time, and customers feel and remember xerox as a number one copier company. Now, what happened to the scientific data systems and the rest of the story. We will cover that in this article in three parts with the underlying concept as Product Extension Syndrome.
1.What has happened to Xerox with a computer company
2.Why companies come up with line extension
3.How Facebook learned its lesson from Xerox
What has happened to Xerox with a computer company
As soon as Xerox acquired the computer company Scientific Data systems, they changed the computer company names as Xerox Data Systems. Let’s remember the tagline again; It is “A machine which does not do copier.” Xerox customers are confused with copier and computers. Customers can keep one thing in their mind for xerox either for a copier or for computers. Since Xerox themselves said the computer could not do copier, customers accepted it and chose copier as their preference and ignored Xerox Computers. Xerox spent one billion during this process, with an addition of 85 million to write off the entire product extension of computers. We don’t remember Xerox Data Systems any more, and the company does not seem to exist at all. Now, Let’s go through the second part of the article.
Why Companies comes up with line item
When Xerox acquired the company Scientific Data Systems, they could not leave their name out of the Scientific Data Systems. Their ego took over, and they felt that the Xerox name would add more value than the Scientific Data Systems. The Scientific Data Systems became Xerox Data Systems. Xerox must also have thought that they can use their time and money to save their advertisement costs. But since they could save their time and money, they never thought about Xerox customers and Scientific Data Systems customers.
Xerox would not have requested feedback from their existing customers, nor would they have taken this through a marketing research mechanism. But customers thought the Xerox is meant for copier, and they could not remove this from their mind and ignored the computers. Hence Xerox Data Systems became a failure, and Xerox wrote off their investments. Let’s cover the third as well as the end part of the article.
How to Position Products with Line Extensions
New products or acquired added products should be dealt with thorough tactful marketing strategy. Companies should spend more on their marketing research; existing customer’s feedback before they change the product name or add a new line item extension. There are two parallel possibilities that the company needs to fight with: acquiring new customers and keeping the existing customers. If a company changes the name, they are fighting to acquire new customers and satisfy existing customers, which is a double side sword thrown at the top of your head.
As an Example, When Facebook acquired WhatsApp, they had a big ego to change the WhatsApp name as part of Facebook messenger. But Zukerberg must have known the previous track record of the xerox story as well as a failure with product line extensions. Hence Facebook allowed the WhatsApp as a separate entity and allowed it to grow rather than changing its name. WhatsApp has grown towards acquiring 1billion plus users, which would not have been possible if it were Facebook messenger.
Summary
We have covered three parts in this article on what happens to the product line extensions, Why Companies develop line items, and How to Position Products with Line Extensions. A line extension is compelling, and when we use it powerfully, we become successful.
Often companies take the line items lightly and end up losing billions of dollars. If you are a startup with one successful product, better choose a new name than riding with the extension of the product name. In this way, you can acquire new customers as well as satisfy existing customers.