Final answer:
A new milder Sriracha sauce from Huy Fong represents a line extension, which diversifies the existing product line. Product differentiation refers to distinguishing a product from competitors through various features, design, or intangible qualities.
Step-by-step explanation:
When Huy Fong considers launching a new, milder version of its renowned Sriracha hot chili sauce while keeping the original product, this strategy is identified as a line extension. This approach involves adding a new flavor, variety, or other differentiation to an existing product line to target a different consumer segment or to offer a new choice to current customers.
The action of creating and designing products in a way that makes them stand out from the competition is known as product differentiation. Huy Fong's focus on using freshly ground peppers and the creator's claims of being fresh, best, and cheapest exemplify this strategy. Product differentiation can include a range of aspects, from physical attributes like packaging or flavor to intangible aspects such as brand reputation, guarantees, and advertising campaigns that influence consumer perceptions and preferences.