As a business continues to grow in sales, there comes a point when a business needs to decide whether they should expand their product line offering or if they should continue to work with what they have. While there are many reasons why a business could benefit from expansion, there are also many reasons why it may actually hurt a business.
In the perfect world, the more you have to offer, the more valuable you are. Unfortunately, that is not the case. When a company begins to expand their product line, a business could be endangering their brand identity.
It’s Not For Everyone
Although expanding may seem like the best strategy, the truth is that expanding posses problems from a marketing standpoint if not done correctly.
To understand the possible implications of product line expansion, we will use Company X as an example.
Company X has built a reputation of building great copy machines. They have built a solid foundation in the minds of consumers, but now they have decided to expand to building computers, fax machines, and other electronic accessories. Although they are now able to penetrate existing markets, the big question is whether or not they can dominate it in the same fashion as they did with copy machines. In most cases, the answer is no. By expanding the product line and offerings, Company X has disoriented consumers. They are no longer relevant in the minds of consumers for any specific product or service, but are rather identified as selling a lot of ’stuff.’ Remember, there is never a demand for ’stuff.’
Don’t Sell Stuff, Sell Your Brand
While the obvious counter to Company X is to bring up examples like Target and Walmart, we must remember that they aren’t known for selling ‘stuff.’ They are known for selling many consumer products at a low cost. Similarly Costco sells many different product, but again they aren’t known for selling ‘stuff,’ they are known for selling products in bulk.
If you look at some of the leading companies that offer a wide range of products to consumers, what you will find is that none of them are known for selling ‘stuff.’ Rather, they are known for selling a particular type. Just how Costco is known for selling goods in bulk and Target at affordable prices, businesses that consider expanding their product offering need to determine what their message will be to consumers.
3 Questions To Ask Before Expanding
1. How much market share do you currently have with your current product offering/service line?
2. Do you have the resources to compete in other product/service market?
3. How will you change your marketing/branding efforts to support your new product lines?