Most businesses will hit a point in time when they have to make this decision. Things are going well with the existing product or product line. You are profitable and ready to take the next step and begin to grow and expand beyond what you are already doing.
You have two key options:
- Expand your current product offerings into new markets, or
- Develop new products for the market you are already in
Most companies at this stage don’t have the money or resources to do both. And so the decision becomes an important one that sets the stage for the future prospects of your business.
Let’s look at each option in a little more detail.
Expand to New Markets
The appeal of option #1 is that what you have already works, and there is a huge swath of the market you’ve yet to reach with it. This isn’t always true, so it’s important to be truthful with yourself. If you’re already reaching everyone in the market, this option is likely not right for you.
New markets can include a number of different things. It can mean new geographical markets, states, regions or countries that you’re not currently advertising or selling in. This is the most obvious interpretation of new markets, and the one most people will think of first.
But it can mean new audience segments which your messaging is not already aimed at. For example, a company offering an online high school diploma might advertise to parents of school age children in order to get them to sign up their kids. To reach a new market, they might then advertise to adults who lack a high school diploma or its equivalent.
The advantage of the new markets strategy is that you are able to leverage a strong, proven product. Your existing business model works, and you have satisfied customers who will vouch for you. But the test is whether or not your marketing team can find the right strategy in the new markets, because it likely won’t be the same strategy that you’re using today.
Develop New Products
The appeal of option #2 is that you know your customers better than anyone else does. You know what needs they have because you are already filling at least one of them. And so you know what other solutions they are looking for.
With a new products strategy, you can do one of three things. First, you can create ancillary products that you can upsell and cross sell to your existing customers. The best example of this is Amazon’s “Customer who bought this, also bought this” feature.
Second, you can create different versions of your existing product. Perhaps you want a slimmed-down, lower cost model that appeals to a more price-conscious consumer or a feature-rich, high end model to appeal to a luxury consumer.
Finally, you can create a new product that leverages your company’s knowledge in an entirely new direction. This is the riskiness, and has elements of the new markets strategy as well since you are targeting a new audience.
Which is right for you?
That’s a decision I cannot make for you. You need to fully understand your industry and your customer base. Do the research to find out if there are, in fact, other markets out there for you to tap or other problems you can solve. And if you can test your way into one or both options above at a low initial cost, you can prove to yourself which option is best.