When we talk about retirement investments, financial experts always say never to put all our eggs in one basket. They always talk about diversifying the sources of income, so there are more options for us when we grow old and retire. But is it the same with businesses? Will financial and business experts also tell us to keep diversifying our products to create more sources of revenue?
Diversified products mean you have a lot of products in your lineup. If you’re a videography company that offers to produce wedding videos, a diversified product range means you’re also offering event styling, hair and makeup, and event coordination. You might also be the one to print the photo album. Such a diversified portfolio gives businesses a lot of chances to earn an income.
On the other hand, owning a niche is about specializing in a particular service or product. Again, given the example of the videography company, a niche market means offering only videography services and nothing else. While you can outsource the different components of the business, your primary offer is to cover events and make videos out of that coverage. It is a small market, but it has a bigger profit margin compared to diversified products.
But the question of how to grow my business does not rely on diversification or niche alone. It’s about knowing your business’ strengths and weaknesses. It’s about identifying what will help you achieve your bottom line. You cannot dive into a niche market without knowing how you’re operating and how you’re reaching your market. At the same time, having too many products for sale can make you more of a generalist, which isn’t a great marketing strategy right now.
Knowing Your Metrics
A lot of generalist entrepreneurs argue that offering a variety of products is a sounder marketing strategy because customers love variety. They love going to one store and picking up all the items they need from that store. What these businesses are offering is convenience. It’s a one-stop-shop for customers.
But when was the last time you checked your metrics? Producing, distributing, storing, and selling one product is composed of a lot of different components. At first, it might look like offering to do event styling with your videography business increases your profit but look at what it costs you. Offering extra services means hiring more people and buying supplies. It means storing these supplies for an extended period, especially when no one’s availing of your services.
You are paying for the storage of these supplies. You’re also compensating the employees you specifically hired to do this job. But the problem is people don’t always want to hire your company since you aren’t known for styling events. You’re great at videography. You have made your name in this industry. But for event styling? They’d rather go elsewhere. And if you lower your costs any further, you’re not going to make a profit that’s worth the effort and investment.
Identifying What Makes You Unique
There is nothing wrong with wanting to diversify your offers. What’s clearly problematic is not having a main product or service. What do you offer, first and foremost? How is your product or service different from the others? If you have a diversified line of products, it is vital that you still identify one or two products or solutions that will attract the niche market.
Not having one special product or service to sell is detrimental to your business. Customers are going to question the quality of the products and services. Do you make the products? Are you a reseller? Do you outsource the services that you provide? The loyalty of consumers boils down to the knowledge that they are getting the best they can afford.
Determining the Profit Margin
Traditionally, niche products have a larger profit margin compared to general products. Niche products are better targeted. Customers who buy niche products are those who are willing to spend more to be different and to stand out. Niche services are the same. If you have a piece of special equipment that needs repair or replacement, you have to call the right service company.
The profit margin is the deciding factor. It can push you to diversify your products or focus more on a niche product. At the end of the day, what your business needs is to make profits—whether it’s through diversification or niche marketing.
It pays to know your business’ strengths and weaknesses when choosing how to make more money. So, sit down and figure out what works best for your business. When it comes to what to offer your market, there’s no special formula to follow because every business is unique.