Brands Magazine
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Do you know what Product Diversification symbolizes?
Business owners must always consider strategies that improve revenues on existing products and diversify into new markets with existing or new products. A product diversification strategy provides opportunities to grow the business by increasing sales to existing customers or opening avenues to entirely new demographics. Take the time to understand how to effectively plan, organize and execute a new product diversification strategy.
The process of expanding business opportunities through additional market potential of an existing product. Diversification may be achieved by entering into additional markets and/or pricing strategies. Often the product may be improved, altered or changed, or new marketing activities are developed. The planning process includes market research, product adaptation analysis and legal review.
The product diversification strategy is different from product development in that it involves creating a new customer base, which by definition expands the market potential of the original product. This is almost always done through brand extensions or new brands, but in some cases the product modification may “create” a new market by creating new uses for the product.
You can approach product diversification in a number of ways. You can modify your existing products so that the new version appeals to a different group of customers. If you make tools for building professionals, for example, consider developing a version that appeals to amateur users. An alternative strategy is to offer new products to your existing customers. A retailer of fruit and vegetables could introduce a range of health foods that appeal to the same customer group. Another approach is to add a new product to your range, aimed at a new group of customers.
Entering an unknown market puts a significant risk on a company. Therefore, companies should only pursue a diversification strategy when its current market demonstrates slow or stagnant future opportunities for growth.
