Many small businesses dream of expanding by launching new product lines. However, successfully negotiating your way to a bigger business with fresh offerings to your customers involves a steep learning curve. We know that. That’s why we’ve prepared this guide that outlines what you need to consider in your quest to expand your product line.
Business expansion is an exceptionally costly affair for small businesses as they may not generate sufficient revenue or have adequate savings to support the growth budget. That’s where access to a small business loan and other financing options becomes necessary.
Reasons to Expand Your Product Line
Here are the main reasons why many small businesses expand their product lines.
1. Minimize Risk of Overdependence on a Product
Businesses can survive changing market preferences, product obsolescence, and competition by coming up with new product lines. A product that may be a big hit today may wane in demand over time as the product goes through the product life cycle and declines. A business with a mix of products minimizes the risk of collapse when a single line becomes obsolete.
2. Enhancing Market Share and Customer Loyalty
You widen your target audience with new product lines. When you expand into newer markets, you become a more established brand and elicit greater customer loyalty from your traditional markets. For instance, if you sell men’s clothes but diversify into the clothing of sale items for the whole family, you’ll have a broader audience to sell. You’re likely to have a tighter grip on your conventional customer base as they’ll come to your store for household clothing needs.
3. To Boost Sales and Profits
By diversifying your product line, you attract new customers and boost your sales. New product lines are an excellent way of stimulating growth in a small business.
How to Expand a Product Line
Expanding your product line requires thoughtful planning.
1. Know What Your Customers Want
Know the needs of your customers before rushing to launch that new line. Many products fail due to a lack of sufficient market demand. Analyze where customers would be willing to spend so that you expand into product lines that deliver value to your target market. If you identify and fill a real gap in the market, customers are likely to reward you with handsome purchases.
2. Define Your Target Market
Be clear on why you’re launching a new product line. Is it to acquire a new customer base, or maintain existing customers, or both? Once you’re clear on what you want, dig deeper into the target audience to refine your offering to their preference. You can get feedback cost-effectively from your social media channels.
3. Draw a Budget for Your New Product Line
Estimate the costs of setting up a new line before venturing deep into the process. Will your business support the expansion or would you need to access small business loans to purchase inventory for the new line? Is your business structured such that you need minimal changes in staffing, technology, and the setup on your premises to accommodate the new line?
4. Analyze Prevailing Market Trends
This is crucial as you’re able to launch products that customers will be purchasing for a while. It’s imprudent to make significant infrastructural changes in your business to accommodate a trend that will quickly wear off.
Be on the lookout for trends that are likely to present big business opportunities by the level of media coverage, social media trends, industry outlooks, and what industry influencers are saying. Plug into these opportunities and capitalize on them while competition is still low and demand high.
5. Find Out What the Competition is Doing
Your aim here is not to replicate what the competition is doing. No. That may make your brand come out as not being innovative. However, you need to wake to what’s transpiring with the competition.
Check out new products from the competition that are likely to impact your sales and respond appropriately. Suppose a huge corporate with access to cheaper inputs is launching into a line. Can you match their efficiency and pricing before investing in that product line?
6. Evaluate Your Capacity to Venture into the New Product Line
Look inwards into your organization to assess the capacity to launch your new line. Is it a product that requires additional certification or licensing from local authorities? Will you require additional staff, extra space, superior technology, or new machinery? Can you afford it, and is it scalable to return a decent profit on the investment?
Consider boosting your budget with small business loans or getting investors to shore up your capital if need be. The ideal situation would be to go for products that require a minimal investment in your current structure. That’s because there will be minimal losses in case the new line flops.
7. Test Your New Product Before Launching It
This is one of the best ways of ensuring you’re making the right move. No one wants to invest funds into a project that eventually misfires. Have a pre-launch test such as a landing page that tests your product’s adequate demand.
Selecting the Best Lines for Your Business
When selecting a business line, you need to contemplate the following ideas:
- Organizational values: Launch into product lines that do not contradict the values that you’re known for by your customers.
- Effect on the entire business: Consider the impact of your new product on the whole industry. For instance, how would a cheaper alternative affect the demand for a premium product you’re offering?
- Scalability: Evaluate the growth potential of the new product in line with your overall organizational growth targets.
Extra Tips to Consider
- Pricing: Employ a pricing strategy that will be profitable to the organization without creating unhealthy internal competition with product lines that are already doing well.
- Timing: Launch a product at a go instead of overwhelming the market with several products at once. Use a product launch to create strong vibes around your brand through the anticipation and the product launch event.
- Be customer-centric: Be focused on the customer’s needs throughout the process from innovation, design, launch, to delivery. There’s a temptation to make it all about the business rather than the client.
Expanding your product line is one way of staying relevant as a small business. By gathering the correct information about your customer’s needs, you’re able to craft a winning proposition that will boost your brand and increase your profits. Apply for small business loans to realize your growth dreams.