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How to diversify your product line

Why should your company diversify their product line? It could be to breathe new life into the company or to break into a new market. Normally companies which are struggling, look into diversifying their product line and that is why it is important to research how to diversify your product line before you do it. Before we begin with the how, let us take a deeper look into what is product diversification.

What is product diversification?

Product diversification is a strategy used to grow a business through different ways of marketing a product or adapting the existing product to appeal to a different customer. There are two approaches:

The defensive approach where you have developed a business around one product but the demand is waning so you need to expand or adapt your product range to survive.

The offensive approach is seeing a new market opportunity and adapting or expanding your current product line is to take advantage of the new market.

How can you implement this strategy to grow your business?

Here are four key steps to consider when using product diversification to grow your business:

STEP 1: How will you diversify your product?

You can diversify your product line by adapting your current product to appeal to a different market. If you produce a product for professionals, you could offer a hobbyist version. Another way is to offer another product to your existing clients. So if you are a fruit and vegetable shop, you may add health products to your shelves to extend your product line. You could also offer a complementary service with your current product, like an app or a tutorial on how to do your business better.

STEP 2: Do you have the resources?

Analyze what resources you need to create the product diversification option you have chosen. If you do not want to create the new product in-house you could look to other suppliers and sign an agreement with them to supply their product or service in your business.

STEP 3: What are the implications of the product diversification on your business?

Do you have the resources to create the new product or extend the existing one? Create a budget for the research and development of the new product. Look at your distribution channels and how will the new product affect them. Does your staff have the knowledge to promote the product successfully and reach sales targets?

STEP 4: What is the risk?

Product diversification is quite a risky strategy; therefore, it is important to acknowledge the opportunity with the amount of risk which would be involved. You do not want to invest in a new product development which will be unsuccessful and can potentially sink your business. For this reason, it is important to research the market. Check what the demand is for the new product and if you can satisfy a need which is still not being fulfilled better. You can also do a small scale market test to see how the new product will be received.

By following these steps, you will be well on your way to grow your business through product diversification.

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