By Caroline Forsey

To consider the potential payoff of product diversification, let’s start with an example.

Lululemon, an athletic apparel company, was founded in 1998 with one core product: yoga clothing for women.

If you’ve been to a store recently, you’ve likely seen how far beyond women’s yoga-clothing Lululemon has grown.

For instance, my brother now buys all his button-down shirts and work pants from Lululemon.

Additionally, last week I bought a bathing suit from the shop.

On their Our Story page, Lululemon states: “Our first designs were made for women to wear during yoga. Through plenty of feedback from our guests, ambassadors and elite athletes, we now design for yoga, running, cycling, training and most other sweaty pursuits for women and men.”

This is an example of effective diversification in-action. Here, we’ll explore what diversification marketing is, and how it pertains to your marketing strategy.

Why diversify your product offerings?

There are three reasons a business might choose to diversify its existing product line:

1. You’ve reached the ‘limit’ on the amount of people you can convert in a market segment.
2. You’ve identified a new product or service that complements the needs of your existing customers.
3. You’ve decided a new level of growth can only be achieved through addressing new market segments.

Let’s dive into the difference between the three of these reasons, now.

First, perhaps you’ve reached the limit of the amount of people you can reach in a market segment. If you created a niche product or service, you might’ve spent the last few years marketing your product to your core audience demographic.

Eventually, you’ll reach your limit of potential people you can reach and convert within that audience segment.

For instance, GoPro started out selling HD cameras for sports and adventure. However, there are only so many people they can target with GoPro cameras — which is likely why they expanded to camera accessories, and even lifestyle gear, including backpacks and clothing.

With an expanded product line, GoPro can now target audiences who are looking for outdoor gear, along with audiences who are searching for HD cameras.

Second, perhaps you’ve identified a complementary product or service to the one you currently offer. To identify complementary products or services, consider what goal(s) your products help your customers achieve, and what other tools or services they need to achieve those goals even faster.

Mailchimp, as an example, started as an email marketing tool. Now, the company has diversified its product offerings and expanded into social media tools and even website builders.

Mailchimp created an email marketing tool to help customers reach new audiences and convert those audiences faster. Social media tools and website builders, then, are natural extensions of that primary goal.

Finally, a third reason you might diversify your product offerings is simply to reach and convert new segments of customers. This is less of a brand-new product or service, and more of a tier-method …read more

Source:: HubSpot Blog