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Expanding your existing Product Offering

There comes a time where expansion your product line is a natural progression within the lifecycle of a healthy company. You have existed in the market for sometime and your business has a level of stability to it; usually in the form of increased revenues and additional profits. But how do you know when your business is ready to expand? And into what areas should you expand? The reality of the situation is that there is no beam of light, no voice from the heavens letting you know, that right NOW is the right time to expand your product offering. Nor is there a guide book that will lead you through the process. Your business is as unique as you are and while there are certain indicators that can suggest it might be a good strategic move to make, you have to be able to gauge them for yourself. You are the most qualified person to make this decision about your business. That being said, there are certain times in a business’ lifecycle when it might be an excellent time to expand. The goal of this document is to cover some of those variables and to offer suggestions as to what product lines you might want to expand into so you can make an educated decision should the opportune moment arise.

How do you know it’s time to expand your product offering? It’s an important question to ask as moving too soon could irrevocably damage your business. Before making the plunge, consider the following:

1. How did other successful companies do it? Do some research; there are a lot of websites and blogs out there with individual success stories. What are eBay’s Powersellers doing? They’re big now, but they had to start out somewhere. Assess their rationales for growth, their strategies around the process and the challenges they faced. Arm yourself with information to better determine if your business is ready to do the same.
2. Is your business already profitable? Only expand if your business is already profitable. A bigger product offering and business means more costs as well. Listing costs, transactions fees etc. all increase with the size of your business. Make sure you can afford to expand before you get too ambitious. It is tempting to keep adding products with the hope that something will stick, but you stand a far greater chance of survival if you make a name for yourself within a niche before trying to dabble in other product lines.
3. Is your market saturated? Consider expanding when you can see signs of market saturation within your niche. Have bandwagon jumpers started crowding your selling market, effectively driving down your profit margins? If so, it may be time to diversify your product offering.
4. Have you identified other potentially higher margins product lines or categories? An enhanced product offering might also be worth considering when you can forecast increased profits in other product categories. Profit can be gained in two ways: more sales volume, or higher margins. Combine the two and the result can be very lucrative should you be able to capitalize on it. Think you’ve identified a potential trend within your niche? Judge the situation carefully, but if you think that you’ve assessed the market and your customer base correctly, expansion into this new product line could be profitable.
5. Is your competition struggling? Their loss is your gain, if you think that by expanding your product line, you can grab a bigger piece of the market. In this case growth is only advisable if you can successfully meet the needs of the consumer better than the competition. This could be in areas such as quality, customer service, product-line scope and service-reliability.

Let’s make the assumption that one (or more) of these situations ring true. You’ve decided that it’s time to grow your product offering, but into what? Ideally you want to expand into an area that leverages your current competitive advantages and knowledge base. As you’re fairly well established in the market (after all you wouldn’t be expanding without having a profitable business), look to your customer base. They are a certain type of person with a certain type of need, what could you add to your existing product line that might meet another one of their requirements? Not sure? Why not ask? Touch base with your customer and determine if there are any areas that they would feel would be a benefit for you to move into. Not an option? That’s fine, however try to assess your customer base and qualify them across certain key areas. What demographic are they? What do they use your product for? Are there any complimentary products that might be of use? For example, if you’re selling urban diaper bags to new mothers, there could be some value into extending into other areas within the baby product market. Cloth diapers, maybe baby mats, or clothes? These are all possibilities that would work within your niche and play on your current competitive advantages.

In the above paragraph several concepts have been alluded to and should be discussed in greater detail in order to shed some light on the reasoning behind them. Complimentary products for one, why bother with them? First and foremost, coming back to your area of expertise (in other words your niche), you are more likely to succeed in a competitive environment in which you’ve got some experience and have an understanding of the variables in play (the competition, customer wants and needs etc). Furthermore, you have an existing client base. Why not leverage that? It is far easier to increase sales through return customers than to bring in new customers.

Product bundling can also help you increase sales and provide added value to your customers. By pairing products together you give your consumer the option of saving time by making a one-stop shopping trip. Efficiency can be given a monetary value, and in today’s busy world, some people are willing to pay more in order to save precious minutes. Additionally, if you correctly bundle a product offering in a new and unique manner this quickly translates into a competitive advantage that will set you apart from competitors.

These tips are not hard and fast guidelines; they are simply suggestions that you may wish to consider before making a move into a new product line. Keep in mind that this is your business, and only you can determine when it’s time to make the move to expand. That being said, make sure whatever your decision, it is well researched and strategically relevant within the context of your company goals. Good luck and happy selling!