Product Line Extension in an Online Environment

Abstract: Previous research has shown that a more varied assortment does not only increase sales by satisfying consumer preferences but also by gaining more attention due to increased shelf space. Product line extensions are therefore not solely of importance when it comes to aiming for a high actual variety in the assortment, but also when aiming to increase the visual size of the assortment. As consumers form assortment perceptions differently in an online setting compared to in a physical store environment, the purpose of this thesis is to understand how the benefits and consequences of product line extensions are perceived when presented on an online category product page. Through two studies, where a fictive web shop format was used, consumers were exposed to assortment variation designs where the absolute and relative variety of an assortment of a specific brand was manipulated. By controlling for a non-existing effect of the vertical placement of the assortment in the first study, we could examine the implications on consumer perceptions of variety, complexity and brand quality when extending the assortment of a brand in both absolute and relative terms in the second study. The results from this thesis show that there only are positive implications on selection quantities from offering an assortment with higher variety. However, the benefits of higher variety are only perceived when extending the assortment from a small (4 items) to a medium (12 items) or to a large (25 items) assortment but not when extending from a medium to a large assortment. The results also show that there is a positive causal relationship between perceived variety and brand quality perception, which has a positive effect on selection. On the other hand, an increased complexity of the assortment, because of more options to choose from, shows no negative impact on the selection.