Diversifying Your Product Line – Questions to Ask
When you’re in business, there are always going to be opportunities to diversify your product line. Maybe you’ve found a new market that you think you can tap into or maybe there’s a new trend that you want to get in on. Whatever the reason, if you’re thinking about diversifying your product line, there are some important questions that you need to ask yourself first.
Which problems am I trying to solve?
Products are meant to solve problems or fulfill a need, also known as a pain point. Otherwise, few people will buy your products, if any buy them at all. Even luxury items or seemingly useless items fulfill specific needs among their target audience. If you’re trying to make a living through your business, producing these items will be either unprofitable or unsustainable.
Do my products complement each other?
Since you’re trying to diversify your product line, you already have other products. Some good reasons why you should ask whether your products complement each other include reputation, efficiency, and quality. This is typically why companies engage in concentric diversification.
For one, if you have already built a reputation for yourself selling your other products, a new, related product will benefit from this reputation. Take KitchenAid, for example; the 103-year-old company has a sizable marketshare because of its long history of selling mixers. Nowadays, they sell various kitchen products such as kettles, food processors, coffeemakers, pots, skillets, blenders, stoves, and other kitchen-related products. Their success in selling their other products relies heavily on their reputation as a manufacturer that produces things that can last a lifetime. If they were to start selling something completely unrelated, such as leather bags or guitars, it would not benefit from their brand reputation. To consumers, seeing a guitar with the KitchenAid name and logo would be jarring and even laughable. On the other hand, seeing a food toaster with its name and logo inspires confidence. This is related to their experience in the field.
Your experience in your chosen field will be very useful in producing new products. For example, if you produce and sell aftermarket bumpers for cars, you will probably already know a lot of things about cars, material strength and durability, aerodynamics, and other related factors or concepts. As such, it would be easier for you to diversify into making spoilers, side skirts, intake vents, and other related aftermarket car modifications. Learning about them will be easier for you, and you will need fewer adjustments to your workflows, supply lines, and production equipment to accommodate the new products.
Which markets are still untapped?
Diversifying your product line is a great way to reach untapped markets in the same industry or audience that you are already catering to. For example, if you are an aftermarket car parts manufacturer, you could consider diversifying your product offerings to include different styles of car parts and accessories to reach well-paying cult followings or subcultures, like Bosozoku, autocross drivers, sleep fans, hi-risers, stance fans, hot rodders, and horseless wagon enthusiasts. This would give you the opportunity to reach a new market of consumers who may be interested in buying more car-related products from you.
It’s important to know these markets too before investing in producing things for them because they might not be interested in your products for various reasons. For example, most hypermilers may not buy any products you make for them as many of them are typically engineers or related professionals who like doing things themselves to get moped-level efficiency out of their cars—spending money on parts fundamentally goes against the point of saving on gas.
Lastly, if you want to find an untapped market, you should also consider which communities or groups of people are marginalized or ignored. This is because most companies typically target the largest markets for a higher profit. However, as an underdog, targeting ignored minorities allows you to take advantage of the lack of competitors. For example, as a pharmaceutical company, you can do research on rare diseases to produce medicine or develop treatments for them. Since people with rare diseases are far and few in between, you can look for them online, partner up with hospitals, and ask for help from a patient recruitment service in order to communicate with your target market or do research on their illness.
Diversifying your product line can be a great way to grow your business – but it’s not a decision that should be made lightly. There are a lot of factors to consider, and you need to make sure that you have a solid plan in place before moving forward. By asking yourself the questions above, you can give yourself a better chance of success when diversifying your product line.