A product diversification strategy is a form of business development. Small businesses that implement the strategy can diversify their product range by modifying existing products or adding new products to the range. The strategy provides opportunities to grow the business by increasing sales to existing customers or entering new markets.
Set your objectives for product diversification. You can take a defensive approach with the objective to protect your business if, for example, demand drops for your products or you face strong competition. This might be important for news companies that have built their business on a single product. Declining market share or revenue could threaten the survival of your business. Alternatively, you can take an offensive approach where you see a strong market opportunity but can’t take advantage of it with your existing products.
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.