For small business owners the word diversification might seem like a risky undertaking. If their business is doing okay now, what’s the point in branching out into new areas that may not bring in much revenue, if any at all?
But as we all know, running a business requires that we take a risk every now and then. And trust us, diversifying into new services and products is a risk that’s well worth taking.
But before we get into the benefits of diversifying into new services and products, let’s take a look at a couple of success stories.
Major brands show us how it’s done
One of the most famous examples of a company diversifying its range of products is Apple. Once known only for their computers, their foray into the world of telecommunications has seen them become the major power in the smartphone industry. In fact, the company has found itself at the forefront of several industries in recent memory. From the iPods right through to iPads, each of their attempts to diversify their product range has been hugely successful.
But it’s not just Apple that have made serious inroads through diversification. Take online poker behemoth PokerStars for example. While they dominated the world of online poker, they were acutely aware that their customers were highly likely to enjoy other casino games. So they decided to expand their services and open a new branch of the business called PokerStars Casino, which offers a complete range of online casino games. In a short space of time, they went from being well-known for poker (it’s in their brand name after all) to being a one-stop website for blackjack, roulette, and even slots.
Branching out into a related but untapped market proved to be a huge success, and the brand has since grown from strength to strength.
So what are the benefits of diversifying into new services and products?
It exposes your brand to new markets
Let’s start with the most obvious benefit. Your business and brand is likely only exposed to a very specific segment of the buying public. The people that require your solution or product are the people that see your brand.
When you branch out into new markets, you are reaching a new audience, who will not only see your new product, but will also learn about your existing products and services. To put it very simply, think of the Samsung smartphone owners that never realised the company also makes laptops. By providing a new product to the smartphone-buying public, Samsung brought a new potential customer base to its existing product line.
It helps avoid the dreaded sales slump
Despite what you may think about the longevity of your existing product range, there will come a time when sales slump. That’s the danger of investing all of your time and effort into one service or product.
When you open up new revenue streams with a new range of products or services, there’s less chance that this will happen. After all, you’re now selling to two or more different segments of the public. This benefit is most apparent when products or services are far removed from one another. That way, a slump in demand for one product is unlikely to affect sales of the others.
It helps a business grow
Preparing your business for growth is the dream of every business owner. But the truth is that with a limited range of products or services, you can only market to a finite number of customers. The potential for growth is only there if you have a truly exceptional offering, but this is quite rare.
With a diverse range of products or services, a company’s growth is virtually unlimited. This is particularly true if you remain open to further diversification, depending on market demand.
As you can see, while investing in diversification can be a somewhat risky undertaking, the benefits are such that every business owner should, at the very least, take it into consideration. The potential for growth and increased revenue is something that’s simply too hard to ignore.