This research investigates how consumer's perceptions about product variety influence product line performance. The research employs a computer simulation based on an appliance manufacturer's supply chain to extend consumer behavior research. The simulation models the demand increase, demand variance, and cannibalization associated with preference attributes and quality attributes. Product line performance is analyzed in terms of revenue, cost, profit, service-level and market share. Results from the simulation experiments indicate that preference attributes and quality attributes perform different strategic functions. Preference attributes, features related solely to consumer's tastes, increase revenue and market share, but do not increase profit. Quality attributes that create a perceived product line hierarchy increase revenue, costs, profits, and market share. Quality attributes that fail to create a perceived hierarchy reduce revenue, costs, profits, and market share. Managerial implications and strategies for each type of attribute are provided. Limitations and suggestions for future research are discussed.
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