Brand diversification: The why, the when, and the how

Posted on June 9, 2022

Updated on June 9, 2022

5 min read time

No matter how successful your brand is, there will come a time when growth begins to plateau.

 

This could be because you’ve saturated the market and your share of voice (what you invest in marketing) is relatively consistent with your share of market. Or it might be that your category’s growth is slowing.

 

Your logical next step here is to look further afield, thinking up new ways to excite your consumers and inject growth back into your category.

 

This is where diversification comes in:  the moment where you go back to the drawing board and think about how your brand can provide new  value in a different way to its consumers.

 

Diversification is a growth strategy in marketing, where brands add new products or services into their portfolios to entice existing customers to buy more, or to expand into an entirely new market. Just like you shouldn’t be putting all of your eggs in one basket - in marketing it’s better to hedge your bets on a combination of products.

 

This can be done in a multitude of ways, whether that be selling your current product to a new audience, selling a new product to your current audience, creating a line extension at a different price or expanding into an adjacent category with a different offering.

 

Whichever way you decide to go, we’re here to help.

 

In this blog we’ll explore:

  • The reasons behind diversification – why do it?
  • The timing for diversification – when to do it?
  • Strategies for diversification – how to do it?

 

Why diversify?

 

There are multiple benefits to diversification.

 

These include:

  • Deepening and broadening your connection with your consumers  –  Can you find additional ways to connect with your consumers? Perhaps by creating a new product that you know a large subset of your target audience would love or adding a new benefit  to an existing product which will tap into a pain-point of theirs, or create added functionality. The more value your consumers get out of your brand, and the more ways you can do this,  the stronger the relationship. This fosters loyalty, which will in turn drive profits.
  • Future proofing your brand – Minimize risk by adding more audiences into your targeting, more products into your portfolio, and line extensions at different prices. The broader you spread yourself, the safer you will be if one of your audiences goes quiet or satisfaction for one product goes down. Not only that – you’ll also open yourself up to new profit opportunities.
  • Expanding your reach – A bigger and broader  audience means more opportunities for growth. Diversifying into new markets or products will give you more reach and more people to sell to.
  • Changing your brand perception – Do you want to be seen as a disruptor? A brand that’s ahead of the curve, trailblazing through your category? Diversifying is a great way to get your name out in the world and change how people see you – going from iterator to innovator.
  • Cross and upselling – When you diversify, there’s the option to both cross and upsell. Cross-selling is when a brand diversifies into an adjacent category, moving loyal consumers from their current category into the new category. Upselling is when a brand diversifies within their current category, creating products with new or different usage occasions to encourage current consumers to buy more.

Blog - Diversification - Happy customer

 

When to diversify?

 

On a product level:

 

You’ll know it’s time to diversify when:

  • Your brand’s growth has started to slow down or become stagnant over an extended period of time, and this trend is relatively consistent with the category's growth rate.
  • Your sales are on fire and people can’t get enough of your brand. Here’s when you’ll start to look for new opportunities to ensure you’re continuing to grow beyond this.

 

Nestle recently announced their decision to diversify into a completely new category - expanding into the plant milk sector.

 

Apple found huge success with their iPhone, and from there, diversified into computers, tablets and headphones to grow further.

 

If you’ve been focusing on a specific product and you’ve reached most of your target audience, it might be time to take a step back and think about diversifying .

 

On an audience level: 

 

If you feel you’re struggling to find new people to buy your products, it might be that you need to broaden your targeting.

 

Can you release a new product to appeal to a wider audience? Think of how even established meat brands are now expanding into the meat-alternative world, producing their own alternative options to entice plant-based eaters to buy from their brands.

 

On a societal level:

 

Sometimes diversification happens in response to unexpected events in our environment. In the peak of COVID, many brands had to release new products to keep up with the changing demands of their audience. We saw some clothing brands release matching masks to help their audience accessorize their outfits with their face mask. When restaurants closed, we saw many businesses expand into meal kits to help consumers enjoy their favorite restaurant-style meals from the comfort of their own homes. The same applied to alcohol brands, as some embraced the challenge and expanded into the production of hand sanitizer products.  

 

Keeping a pulse on these evolving needs is key to judging the right time to diversify.

 

Blog - Diversification - Dishoom Meal Kit

 

How to diversify 

 

When outlining your diversification strategy, it’s important to align to the needs of your audience. A good way of ensuring your strategy is customer-centric is by using the 16 Driver framework – a marketing framework that’s been neuroscientifically proven to strengthen  brand-consumer relationships.

 

These Drivers range from rational  factors – like how accessible or consistent a brand is – to the emotional – like how aesthetically appealing or attractive it is.  

 

Blog - Diversification - 16 Drivers Matrix

 

You can think of these Drivers as ‘opportunities’ for your brand – a way for you to hone in on a specific aspect of your brand  which consumers value in your category .

 

Maybe you want to come across as more Innovative through your new product launch?

 

Or perhaps you want to release a product that really taps into a key consumer pain-point? In this case, Empathy would be the Driver for you to focus on. 

 

Although you can choose to focus on any of the 16 Drivers , always keep these 5  in mind when mapping out your diversification strategy:

 

  • Consistency – Is what you’re doing consistent with what your brand is and stands for? You don’t want to go after something that’s widely different to your existing product portfolio or in opposition to your proposition. This can alienate or confuse your existing audience. It shouldn’t feel like you’re just jumping onto the latest trend. Rather, executing your diversification strategy  should feel natural and authentic.
  • Clarity – Is the purpose behind your diversification strategy clear? Can you be sure each move you’re making is in line what your brand stands for?
  • Empathy – Listen to your consumers to understand what they want first by looking at your comments on social and at reviews of your products. Is this new product rooted in a real consumer pain-point? Will it help to make their lives easier or better? Clearly communicating the value the consumer can expect from this product will help to encourage trial – as well as showing the differences between this product and your existing range.
  • Relevance – How does this product relate to the wider world? Is it sensitive to what the consumer is currently experiencing? For example, as global prices rise, are you able to release a new version of your product in a smaller pack size and at a lower price?
  • Innovation – Is your new idea ‘innovation for innovation’s sake’ or innovation that's rooted in what consumers are asking for? Think back to the audience need your new product is addressing. Doing the unexpected and disrupting your category takes innovation one step further - as long as it’s fulfilling a customer need or want.

 

An example of an Innovative diversification strategy is Spotify’s, ‘Car Thing’. The brand released their own car-play product to make it easier for consumers to listen to their favorite songs when on-the-go. The aim was to provide a ‘truly frictionless audio experience for users. This was an entirely new area for Spotify, as their first physical product. The reason it did so well was because it was grounded in the universal consumer pain-point of the difficulty of listening to music when driving (Empathy). The new hardware addresses these points, providing a seamless listening experience for all drivers.  

 

Not only did Spotify deliver an Innovative and Empathetic strategy, they also stayed true to what their brand stands for and communicated clearly why they’d made the move (Consistency and Clarity). Ultimately, the new product still feels Relevant to the brand’s proposition and to the needs of its consumers, who want an easier listening experience while travelling.  

 

Blog - Diversification - Spotify Car Thing

 

When done right, diversification will be a huge gain for your brand. But the important thing to remember is starting slowly. Diversifying  too quickly will confuse your existing consumers. It’s best to dip your toes in slowly and test, test, test   - to ensure what you’re launching will resonate with your consumers.

 

If diversification is the next step for your brand, we’re here to help you out with an exclusive creative testing offer – unlimited testing for June only when you sign up to ProQuo. This allows you to test any new asset , idea, ad or campaign - finding out within hours exactly how your consumers feel about it.

 

Find out more here.

 

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