Most businesses have more than one product or service that they offer. They are not all created equal. So if you want to maximize both sales and profit, diversify products just like you diversify your customers.
What Are Diverse Products?
Some products or services are highly profitable, others produce low margins. Some are single transactions, others are recurring. Some have broad appeal, others have narrow appeal. Some are labor intensive, others are not. Some are clearly unique – nobody else offers this product or service – while others are vanilla in nature.
Many of us don’t think about it this way. But a little variety can really go a long way to help maximize profit and reduce risk. Financial planners use diversification when putting together an investment portfolio. You can do the same with your products and services portfolio.
Categories For Product Diversification
Whether you sell merchandise, finished goods, or services, your offerings will typically fall into one or more of the following categories:
Customary: Products or services that customers readily associate with you or your business based on your industry. These may or may not represent a substantial portion of your sales, but customers may view them as necessary to ‘be in the business’. For example, annual tax preparation services is a standard offering for accountants. We expect them to be able to do our personal or business tax returns.
Core: These represent a substantial amount of sales or profit to your business. They may or may not be unique but often are the products and services that are ‘top of mind’ when people think of your business. You sell a lot of these so declines in sales of these products would heavily impact your overall business.
Complimentary: Products or services that go well with your core or customary products. They are natural fits. They are not typically ‘standalone’ products for YOUR business, but they offer customer convenience and incremental profit opportunities for you.
These types of products or services may be delivered by your company directly or seamlessly through a third party. For example, payroll or bookkeeping services are complimentary offerings for accountants; window cleaning is a complimentary service for residential or commercial cleaning service companies; watch repairs and jewelry cleaning are complimentary services for jewelers.
Easy Entry: Services or products that provide an easy, affordable way for customers to try you out. This is done with expectation for additional or premium products in the future. For example, a financial planner may use a financial plan to attract portfolio customers; a car dealer may use oil changes to attract car repair customers and future new car buyers; a consultant may use webinars to attract private clients; an attorney may offer employee handbook reviews to gain access to employment law clients. Often, ‘easy entry’ products or services are lower margin and profit, but they work IF you upgrade or sell them additional products.
Bundled: Products that combine various elements, features or services for convenience, savings or added value into a single offering. Most are familiar with cable companies who package internet and phone with cable TV. But anyone can do this if the bundle is valued by your target customers. Here are some less traditional ones: Accountants can bundle tax services with quarterly planning, salons can bundle hair and manicure services, a hardware store can bundle paint, brushes, and drop clothes.
Premium: These are products or services that deliver more perceived value and command higher prices. So they generate greater profit. These are often upgrades to standard or core offerings or are products that are in demand but are unique or have little competition. Think good-better-best!
Leveraged: Products or services that generate revenue and profit without substantial resources – time, people and money — beyond initial development. Information products and alliance programs are examples of these offerings. These provide passive income for your business. Most businesses have the ability to create them.
Recurring: These repeat in a predetermined frequency, such as weekly or monthly, and can be packaged accordingly. Here are a few examples: maintenance or service contracts, quarterly planning services, education or activity (dance, karate) classes, cleaning services, and lawn care.
Think Diverse To Maximize Profit
So where do your products and services fall on the diversity scale? Are all your eggs in one or two baskets? What opportunities exist in some of the other categories? Time to start tapping into those possibilities. Think different, think diverse.
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