• Offer more. Through diversification, you’ll be able to offer your customers greater choice. Your additional products and services may complement other things that your company offers – which enables you to up-sell. Additionally, diversification often encourages repeat business from existing  customers.
• Bigger, better things. By diversifying your products and services, you’re sending a clear message to your target audience – that you’re a business that’s going places. Your willingness to invest in fresh products and services establishes that you’re in a strong position – which builds trust in your brand.
• Additional revenue. Creating an extended range can bring in additional streams of revenue, which equate to better profits.
• Spread business risk. It’s never a good idea to be dependent on one product or service. What happens if a competitor offers what you do, but for less? Or if the market no longer need that product or service? By diversifying your business, you’ll be less likely to struggle if one of your products no longer generates a profit.

 

Negatives

• Investment. Any form of diversification will inevitably involve an investment of time and money. You’ll need to research the market, locate suppliers, market your new products and services – in short, it’s not an insignificant commitment, and you need to be in a financially strong position to do it well.
• Distraction. Diversifying your business requires a lot of focus and energy. This can divert your attention (not to mention your work force) away from other key aspects of your business, which can cause problems – especially if things start to slide.
• No point? For certain businesses, there will simply be no real advantage to diversify. The hassle of doing so would outweigh the benefits – making it a pointless endeavour.

An Example of Diversification Done Well

Gillette is a prime example of successful diversification in action. Originally, they were market leaders for shaving razors. In this prime position for growth, they diversified their range – offering their customers complementary products, such as shaving gels and creams.

Adopting this approach created a ‘safety blanket’ for the company. If one product were to start losing popularity, the business has other items in their range to ensure the company stays afloat.

Is Diversification Right for You?

Diversifying your business is one route to growth – but it’s important to remember that it’s not the only option available to you. There are other ways to take your company to the next level, and it’s vital to consider all options before making a decision.

When deciding whether or not to diversify, ask yourself the following:

1. Do I have the necessary time and resources to do it?
2. Would it complement my existing business model?
3. What results can I realistically expect to achieve from this?