Market Diversification Does Your Business Need To Adapt
In today’s fast-paced and ever-changing business landscape, companies are constantly seeking new opportunities for growth and profitability. One strategy that has become increasingly popular is market diversification – the process of expanding a company’s products or services into new markets or customer segments. Market diversification can help businesses reduce their reliance on a single market or product, spread risk, and create new revenue streams. In this article, we will explore the concept of market diversification and its benefits, as well as the challenges that businesses may face when implementing this strategy. We will also provide examples of companies that have successfully diversified their offerings and expanded into new markets, and offer practical tips for businesses looking to pursue market diversification.
So what happens when you have sold all of your existing products or services to all of the potential available customers i.e. you have completely saturated the market.
Well if you have delivered a great product / service to these people then there is always the opportunity for some product diversification.
So you could develop / introduce some products that allow up sell or cross sell. Just think about the last time you purchased an electrical item. Hopefully at the point of purchase the assistant asked you the questions
- Do you want the batteries
- Have you seen the cover / bag / bracket / lead etc to go with the product
- Are you interested in purchasing a guarantee / extended warranty
Increasing The Value
So all of the above elements help to increase the value of the sale (and hopefully allow a significant increase in the profitability of the transaction) as well as making the customer feel more valued within the transaction.
What if you need to find a new customer segment to sell to? Well that’s where Market / Customer diversification comes into play. Perhaps your product has been developed for a customer segment of Large businesses / organisations? Could the product be made suitable for Medium size enterprises.
If your service is geared at the 18 to 30 Female segment, could this be adapted to make the service suitable for either an older or younger female segment or even a male market.In some cases the product / service might need to be slightly modified / adapted to make it fit for purpose (so in some ways this could be considered product diversification – but I don’t want to split hairs)
Is there a market available to you that you have previously not targeted. For example as a manufacturing company have you sold to aerospace and marine, is there now an opportunity to sell the service to off shore / energy or pharmaceutical.
Market diversification alone does not necessarily allow a company to increase prices. The ability to increase prices depends on a variety of factors such as the level of competition in the new market, the value proposition of the company’s products or services, and the willingness of customers to pay higher prices.
However, market diversification can indirectly help a company increase prices in certain situations. For example, if a company successfully enters a new market where there is less competition or where their product or service is perceived as more valuable, they may be able to charge higher prices. Additionally, by diversifying their offerings, companies can create a more differentiated and unique value proposition, which may justify higher prices for their products or services.
It is important to note that increasing prices should not be the primary motivation for pursuing market diversification. The goal of diversification is to reduce risk and create new revenue streams, and any potential price increases should be seen as a secondary benefit. Companies should also be cautious not to overprice their products or services in new markets, as this can lead to customer resistance and ultimately harm the company’s reputation and sales.
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The Importance Of Clarity In Strategy
if you are looking to diversify your business, you will need a business strategy. Diversification can be a complex process that involves identifying new markets, products, or services to pursue. Without a well-defined business strategy, you may struggle to successfully navigate the challenges and opportunities that come with diversification.
A good business strategy will help you identify the areas of your business that are most suitable for diversification, and then outline a plan for how to execute that diversification effectively. This may involve conducting market research, identifying new revenue streams, developing new products or services, or even acquiring other businesses.
Your business strategy should also take into account the resources and capabilities you currently have and how you can leverage them to achieve your diversification goals. Additionally, it should include a clear timeline and set of performance metrics to help you track progress and make adjustments as needed.
Overall, a well-designed business strategy is essential for any business looking to diversify. It can help ensure that your diversification efforts are aligned with your overall business objectives, and that you have a clear roadmap for success.
Have you you got a Sales and Marketing strategy?
If yes, that’s great that already puts you ahead of many of your competitors. But does your strategy have the clarity that enables everyone within the company to know exactly where the company is heading and what it is looking to achieve? If you don’t have a strategy does your company feature some of the traits as shown below?
The difference between Clarity and Foggy
The following characteristics are exhibited. Which of these characteristics does your business exhibit
|Engaged people||Demotivated people|
Five great clarity questions
- What are we trying to achieve
- What does success look like
- How will we measure success
- Why is this important to us
- What are the consequences (of failure)
Research has indicated that typically only 48% of managers and employees know a businesses most important goals.
7 Elements Of The Lifecyle Marketing Process
There are various stages in the lifecycle marketing process. We have found that companies have different levels of capability for each of the stages. Simply look at the following stages and evaluate what you are currently doing and how effective it is.
Attracting Customer Interest
- What are you currently doing to attract customers?
- What are you doing to get visitors to your website?
- What are you looking to do to attract footfall or get the phone to ring with enquiries?
Capturing customer / visitor leads
- What are you currently doing to capture customers or prospects details who enquire personally?
- What are you currently doing to get capture details of visitors to your website?
- What are you doing to stay in contact with your visitors?
- Do you have a pre planned system in place to allow quality communication with prospects?
- What quality content do you have in place to offer prospects?
Converting Prospects To Customers (Converting Lapsed Customers To Live Customers)
- How do you know when your web visitors are ready to buy?
- Do you know how close prospects are to purchasing
- Are you able to categorise and profile the quality / future buying potential of your prospects
- What mechanisms do you have in place to stimulate a customer to buy from you
- The following stages Enquiry, Qualification, Quotation, Negotiation, Outcome (win or lose) may help systemise the process
Deliver And Survey
- What do you do to ensure that your customers are happy?
- How do you find out about how well you have performed and if you could improve?
- How do you identify what your customers need that you don’t supply?
Up Selling And Cross Selling
- What are you currently doing to sell more products and services to your existing customers?
- Are there opportunities to improve the way you up sell / cross sell
- Are you asking satisfied customers for referrals
- How do you manage the process
Lifecycle Marketing Planning
Consider each of the above. You might want to score each element out of 10 (with 1 being very poor to 10 where you perform that activity brilliantly) and then identify which of the stages is most challenging to your business.
Market Diversification – Targeting
When a business aims to approach market diversification and target a new market, it should consider the following approaches:
- Market Research: Conduct thorough market research to identify potential new markets. Understand the demographics, preferences, needs, and behaviours of the target market. This research will help you determine the feasibility and potential demand for your product or service.
- Segmenting and Targeting: Once you have identified the new market, segment it into smaller, more manageable groups based on common characteristics such as age, location, interests, or buying behavior. Choose the segments that align best with your business offerings and capabilities, and focus your efforts on targeting those segments effectively.
- Tailor Your Value Proposition: Adapt your value proposition to meet the specific needs and preferences of the new target market. Analyse what unique benefits your product or service can offer to this market and emphasise them in your marketing messages. Highlight how your offering solves their problems or fulfills their desires better than existing alternatives.
- Competitive Analysis: Understand the competitive landscape of the new market. Identify your direct and indirect competitors and analyse their strengths and weaknesses. Differentiate your business by offering unique features, better customer service, competitive pricing, or innovative marketing strategies.
- Marketing and Communication Strategy: Develop a comprehensive marketing and communication strategy that aligns with the new target market. Utilise appropriate channels to reach your audience effectively, such as social media, online advertising, influencer marketing, or traditional media. Tailor your messaging and content to resonate with the new market’s values, language, and cultural nuances.
- Distribution Channels: Assess the most suitable distribution channels for reaching the new market. Explore partnerships with local distributors, retailers, or online platforms that have a strong presence in the target market. Consider adapting your product or service to meet any specific requirements or regulations of the new market.
- Test and Iterate: Start with a small-scale pilot or test campaign to validate your assumptions and gather feedback from the new market. Analyse the results, measure key performance indicators (KPIs), and make adjustments based on the insights gained. Iteratively refine your approach to improve market penetration and customer engagement.
- Build Relationships: Invest in building relationships with potential customers, influencers, and industry stakeholders in the new market. Attend relevant trade shows, conferences, or networking events to establish connections and gain insights. Leverage social media and content marketing to engage with your target audience, answer their questions, and build trust.
- Adapt and Innovate: Remain flexible and open to adapting your strategies based on market feedback. Continuously monitor market trends, customer preferences, and competitive dynamics. Innovate and introduce new features, services, or experiences to meet evolving market demands and stay ahead of the competition.
- Long-Term Commitment: Market diversification requires a long-term commitment. Be patient, persistent, and willing to invest resources into building brand awareness and market share in the new target market. Develop a sustainable growth strategy that aligns with your overall business objectives.
Remember, market diversification requires a thoughtful and well-executed approach. It’s crucial to balance your ambitions with the available resources and capabilities of your business. If you would like to know more about market diversification contact Andrew Goode