Product proliferation occurs when organizations market many variations of the same products. This can be done through different colour combinations, product sizes and different product uses. This produces diversity for the firm as it is able to capture its sizable portion of the market. However, it can also be considered that marketing so many new products leads to economic resources being wasted; the consumer becomes confused and mistakes are made in the purchase of products.
Product proliferation is often used by incumbent firms as method of entry deterrence. By developing a large variety of products, the incumbent firm is able to occupy gaps in the market that potential entrants may have exploited, thus reducing the threat of competition.
The very dynamism of product proliferation makes it hard to manage. Complexity is spawned by an ever-changing landscape of customer demand and companies' attempts to meet that demand with configurable products and more product variations.
Product proliferation can sometimes also lead to cannibalisation of the existing product line of the company
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