So, you have a product that is performing well, and following customer feedback you think you can make some changes and develop a new improved product.
The new improved version is a bit more complex so it costs a bit more to produce but customers like it and it starts to out-perform the original product. Overall, sales are up, but of course they are now spread over two products. That’s twice the storage costs, twice the merchandising time, etc.
Customer feedback suggests further improvements and so version three of the product gets developed with increased complexity and consequently reduced margin. Again, sales increase a bit as the product better meets customer needs but margin and costs make the new products less profitable than the original.