To consider the payoff of item diversification, let’s start with an example.
Lululemon, an athletic outfits company, was founded in 1998 with one core product : yoga clothing for women.
If you’ve been to a shop recently, you’ve likely seen how far past women’s yoga-clothing Lululemon has grown.
For instance, my brother now purchases all his button-down shirts plus work pants from Lululemon.
Additionally , last week I purchased a bathing suit from the shop.
On their Our Story web page, Lululemon states: “Our first designs were made for women to decorate during yoga. Via plenty of feedback from our guests, ambassadors plus elite athletes, we have now design for yoga exercises, running, cycling, schooling and most other exhausted pursuits for women and men. ”
This is an example of effective diversification in-action. Here, we’ll explore exactly what diversification marketing is usually, and how it pertains to your marketing strategy.
Why diversify your product choices?
There are 3 reasons a business might choose to diversify its existing product line:
- You’ve reached the particular ‘limit’ on the amount of people you can transform in a market section.
- You’ve determined a new product or service that will complements the needs of the existing customers.
- You’ve decided a brand new level of growth can simply be achieved through handling new market sections.
Let’s jump into the difference between the three of these factors, now.
Very first, perhaps you’ve reached the limit of the amount of people you are able to reach in a marketplace segment. If you created a niche product or service, a person might’ve spent the last few years marketing your product to your core audience demographic.
Eventually, you’ll achieve your limit of potential people you can reach and convert within that viewers segment.
For example, GoPro started out selling HD cameras for sports activities and adventure. However , there are only many people they can target along with GoPro cameras — which is likely the reason why they expanded in order to camera accessories, and even lifestyle gear, including backpacks and clothing.
With an expanded production, GoPro can now target audiences who are looking for outdoor gear, along with audiences who are searching for HD cameras.
Second, perhaps get identified a complementary product or service to the one you currently provide. To identify complementary products or services, consider what goal(s) your products assist your customers achieve, and what other tools or services they need to attain those goals actually faster.
Mailchimp , as an example, began as an email marketing device. Now, the company offers diversified its product offerings and extended into social media tools and even website builders.
Mailchimp created a message marketing tool to help clients reach new viewers and convert those people audiences faster. Social networking tools and web site builders, then, are usually natural extensions of that primary goal.
Finally, a third reason you might diversify your product offerings is simply to reach and convert new segments of customers. This is less of the brand-new product or service, and much more of a tier-method in which you have the same item with varying features depending on audience portion.
An example of this is a software company that initially targeted smaller businesses, and is now expanding into the enterprise market segment.
In order to successfully expand, you’ll need to ensure your new product features accurately address enterprise users’ needs — which will be drastically different from your small business customers’.
Another illustration is a sports footwear company that is constantly on the create sports shoes, and doesn’t diversify its products or services over and above sports shoes. However , the organization does start producing different lines associated with sports shoes to address different audience segments: which includes tennis players, golf players, and joggers.
Advantages and Disadvantages to Item Diversification
There are a few major benefits to diversification, including:
- Minimizing deficits : Ever heard the phrase, “Don’t put all of your eggs in one basket”? That’s the premise of the advantage. Basically, if some of your products underperforms, you’ll be able to minimize organization revenue loss in case your other products are usually performing well or even better than expected.
- Increasing brand recognition : In the event that Apple only marketed computers, it probably wouldn’t be the well-known brand it is today. But since the company offers expanded into mobile phones and music players, it’s expanded the amount of customers who use an Apple product. Because customers increase, therefore does brand acknowledgement.
- Boosting customer lifetime worth : By expanding your offerings, you’re increasing opportunities for customers to find value inside your brand — that could increase brand commitment. For instance, if Lululemon just provided yoga pants, We probably wouldn’t end up being such a big fan. But since I can obtain workout clothes, work clothes, and even swimsuits from them, my devotion towards them is high.
If you create a tier-program in which you provide additional product functions for varying stages of a business, most likely minimizing the risk that the customers will outgrow you.
However , there are also risks associated with diversification. A few major dangers include:
- Brand dilution : People no longer relate your brand with all the product or service you your own were initially known for, and they’re unsure exactly how your new products relate with your business mission or even values.
- Resourcing limitations : You don’t have the budget or even headcount to effectively create new products or services, or your own marketing team doesn’t have the resources effectively target a new market audience.
- Inconsistent support for additional products : If your support group isn’t prepped to deal with the new complaints or challenges prospects plus customers are facing with your new product, the industry’s overall satisfaction with your brand could decrease.
Marketing’s Role in Diversity
If your corporation is diversifying its product portfolio, your marketing team plays a major role in the success of that growth.
Among other things, your marketing team is likely in charge of market research (including your segment’s unique problems and pain points), product development (i. e. ensuring your product effectively meets your focus on audience’s needs, especially as those needs evolve over time), and creating a productive product launch .
Ultimately, your marketing team must learn how to target your brand-new market segment — which might be difficult if your brand hasn’t focused that audience in previous marketing promotions. (To learn more about market segmentation and targeting, take a look at The Marketer’s Guide to Segmentation, Targeting, & Positioning . )
And, just as significantly, your marketing group needs to mitigate some of the risks associated with diversity.
For instance, online marketers can minimize brand name dilution by informing a comprehensive story to the public that outlines why these new products or solutions make sense to your business’ vision, goals, or overall mission.
Lastly, whenever marketing your new products, services, or growing into new market segments, consider the way you might diversify your own marketing strategy to achieve development with these new product offerings.
A marketing strategy that worked properly for one product won’t necessarily work well another — so it’s essential, as a marketer, a person remain flexible and open-minded to pivoting to properly address the needs of these new customers.
Whenever done properly, diversity is an incredibly fascinating opportunity to fuel long lasting growth… Just consider the growth Lululemon offers seen since producing the courageous jump into apparel outside of women’s yoga clothes.