Diversification - a step too far?
I have a lovely client whose specialises in manufacturing. They do a wonderful job and have plenty of appreciative and loyal clients.
However, there has been a change on the management board and recently they’ve brought in a new director who’s full of forward-thinking ideas and is a real go-getter. Trouble is, he loves PR, has no expertise in it, but thinks it would be a wonderful idea to diversify the business and launch a new service area – manufacturing PR.
Complimentary rather than random!
I’m not knocking diversification (or as us marketers call it - brand extension) in general, as it’s commendable and a wonderful way to grow your business and to survive during difficult times. But good diversification to me would have been into a complimentary area, i.e. parts and servicing, not into something that their clients’ might have trouble understanding. And whilst this scenario obviously has a slice of ego built in, it’s my job as their marketing consultant to point out the future problems that this decision might bring and of course try to mitigate them now.
Now I’m a marketer pure and simple, so if suddenly I decided to run a local taxi service in conjunction with my core business, people might wonder what the link is and whether I have the right experience to do that. And with any period of intense questioning, my clients might conclude that I have lost the plot and wonder if my usual marketing offering might be affected as a result of my new passion.
Common sense, research and planning
So next time that diversification comes to your table for discussion, remember that the adage “diversify or die” might be true, but good diversification is all about common sense, research and planning. And if you bear in mind that only 15-20% of new consumer products/services succeed, then it’s even more essential that you get it exactly right from the word go.
If you want to know about famous brand extension failures, who can remember McPizza, Virgin Brides, Zippo (the lighter) perfume, Harley Davidson cake decorating kit, EasyJet’s EasyCinema and Cosmopolitan (the magazine) yoghurt. And if the answer is what, how, why and when, then that’s precisely my point!
To be successful in the diversification stakes as a business owner you must be able to:
- Demonstrate how your new product/service is different. Firstly, different from what you currently offer and secondly different from what your competition are offering
- Do your homework and only invest in a new product or service range that will contribute to a sizeable increase in sales
- Assess the risks (financial and profile wise) and decide whether it’s worth it as a long term strategy
- Decide whether you should integrate the diversified business into one company or ring fence the new operation as a business in its own right
- Decide whether your business is strong enough to be an umbrella brand where your core values will be able to resonate across the new activities
- Have the right people with the right skills in place to help you
- Focus on your new venture without neglecting your core business
- Correctly position your new product/service with simple and easy to understand messaging
- Get your timing right – test it first before doing the big launch
For help and advice on diversification/brand extension ideas so that it helps rather than hinders your businesses growth, contact Vicky at Fuel on 07766 566690 or email firstname.lastname@example.org