Assessing the Dimensions of Product Variety on Performance: The Value of Product Line and Pack Size

Abstract

This paper studies the impacts of product variety along two dimensions: product-line variety and pack-size variety. Previous research has often found that increased product variety is associated with increased sales. Interestingly, we find that this is not always the case, once the negative impact of product variety on fill rates is introduced. Specifically, product-line variety has a positive total effect on sales, but pack-size variety has a negative total effect on sales. We also investigate potential nonlinear impacts (with decreasing marginal effects) of product-line and pack-size variety, and find the result to be one of diminishing returns.

Keywords: Product variety; Product line; Pack size; Fill Rates; Sales; Distributors