It’s an age-old dilemma. Diversifying your product range can help you meet a broader range of customer demands, but will it spread you too thin? Devoting your resources and energy to a narrower product range may ensure greater quality, value, and market share, but do you risk putting all your eggs in one basket?
The truth is, diversification and specialisation are both proven business growth strategies but you can’t do both at once, and many businesses that attempt to end up accomplishing neither. If your small business is growing, you will inevitably need to choose between branching out or honing in, and this decision will have a major impact on the identity of your brand moving forward.
So, how can you determine whether diversifying or specialising your product range is the right path for your business? Continue reading to find out!
1. Know your market size
If you want to determine which option is more suitable for your business, you must first know your market size. If you command a sizeable market share with a narrow range of products, you may find that specializing in those products locks down your existing market share and creates a solid foundation for growth. However, specialising is only a wise choice if your brand has already built a strong enough association with the product among a sustainable number of people. Knowing the size of your existing market share allows you to quantify your potential to expand that market share or achieve similar results in other markets.
2. Review your product range
Reviewing your product range can be beneficial when deciding whether to diversify. Savvy business owners understand that wading into new product territory without the necessary knowledge or resources will only result in red ink. Ask yourself whether expanding your product line will increase your sales or if the decision is just going to end up as excess inventory to manage. If you’re selling more products and offering more services, it means you’re allotting more time to manage additional inventory that isn’t providing adequate returns. Remember that a diversified product range will also require a diversified marketing strategy. Therefore, choosing to diversify requires a lot of planning and thoughtful deliberation. You must first identify what your strategic assets are and decide from there whether your company can offer something that replicates the success you currently enjoy in your current market.
3. Understand customer trends
Market research plays a vital role in understanding which business strategy will work well for your business. Specialising your product range opens the door for you to position your business as a “go-to” provider, wherein you can build a loyal customer base. Would your customers follow you into new product territory? The answer may depend on whether your customers have a stronger relationship to your products or your brand. It all boils down to your business keeping up to date with the latest trends in your sector as well as understanding what your customers truly need. Based on what you have studied and gathered, decide whether you can sustain growth by specialising or diversifying. Your company should understand what your customer base needs and where their interests are shifting, so that you can develop a truly unique offering and lay the foundation for a long-term competitive advantage.
Knowing the right route for your business
As you study your niche, you can test out expansion strategies by introducing one service or product at a time to see how it fares. Bartercard is a great platform to help you learn your market by testing product lines among a supportive business network. By joining Bartercard, you can connect with thousands of other businesses in various industries, introduce your brand to local and international markets, and attract global attention. Barter trade with active members and transform your excess capacity into extra sales. Contact us today to become a member!