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Increase Profits through Expansion and Diversification

May 19, 2009

Although the economy is contracting, your business doesn’t have to. If your sales have slumped and your profits waned, win over clients with new and diversified products.

One of the biggest misconceptions of the current economy is that all businesses are contracting. That’s simply not true. There are companies that are not only surviving, but thriving. The key to success is market research. Find out what products and services are in demand. Also, focus on why customers choose one product over another. Right now, the green movement and charitable giving are big motivators for public spending. To find out what works best for your business, research and planning are imperative.

Once you’ve re-evaluated who your customers are and what they want, consider providing variations of your product or service at multiple price points. Diversification is a key profit-building strategy. Your focus needs to be on generating multiple and complimentary streams of income.

If you own a bakery, you should have high-end customizable offerings to appeal to corporations and wedding planners, mid-range options for small businesses and special events, as well as affordable pastries for the every-day customer. If you are a consultant, then provide a downloadable e-book or white paper, a paid webinar, a local workshop and a larger seminar or conference each at a different price. These options allow customers to choose the item that best fits their needs and budgets.

In addition to providing multiple price points, create packages or customizable plans that give the customer greater freedom and flexibility. Offer your new product or service as part of a bundled deal or provide free samples or trials with purchase of popular items. This allows customers to test new offerings that they might not have tried otherwise. Also, consider the buffet concept. Consumers love customization and flexibility. Give them the ability to pick and choose exactly what they want, rather than getting the standard package that includes items they don’t need.

In regards to flexibility and product positioning, take a lesson from online retail giant, Amazon.com. When selling a book, they provide both new and used versions for sale, as well as bundled deals where the customer can get two or three similar books at a slightly reduced price. To successfully expand your offerings and increase revenue, strategic marketing is essential.

In the end, your ultimate goal is increased profits. But, the process includes multiple steps. To be successful, you need to take a comprehensive approach. Make sure you fully understand your market before developing new products. Also, diversify your offerings with various price points in mind. Then use cross-promotion, package deals and other marketing strategies to promote your new line.

And remember, if you need help expanding your products or services, contact a SCORE business mentor online or in-person.   SCORE Lancaster is here to help you succeed.

Brought to you by SCORE Lancaster “Counselors to America’s Small Business.” Ask SCORE Lancaster  We are here to help.

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