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Benefiting from Product Diversification
by Carl Tompkins

For years I’ve had the opportunity to share the benefits of adding new products and services to a core product type that represents the majority of an organization’s income. I refer to this as product diversification. What remains surprising is how so many companies struggle with this subject, failing to benefit from its merits.

Motivation
I’ll start with some motivational concepts in order to make sure that you are willing to pursue product diversification. First off, so many people within the AGR industry suffer from having only one product to sell—auto glass. This creates enormous vulnerability to failure—if something goes haywire in the industry, eliminating your ability to sell auto glass, you’re out of business. A fallback plan for business survival is essential and, at minimum, requires your ability to sell an entirely different product line in order to secure the necessary revenue to support your operation. This may require more than one product or additional line of products.

The second benefit of product diversification is new and additional revenue. For every auto glass replacement sold, product diversification creates the means to increase sales dollars by at least 15 (if not 20) percent per job.
Also, product diversification does eliminate a lot of stress in the workplace as it keeps you from putting all your eggs in one basket. Having visited many glass shops over the years, those that seem to be most at ease with the difficult conditions that arise in the auto glass replacement industry are those that have more than one product to sell.

Getting Started
Adding new products and services to your business starts off with what is most important: product expertise. You must be knowledgeable in the features and benefits of the product, the competition, how to sell it, how to install it (if not an over-the-counter product sale), how to warranty it, and how to buy it. This knowledge allows you to associate with the best brands of products, receive adequate support from a manufacturer, and deliver an effective marketing approach that adds profit. A study conducted recently through Belmont University revealed that on the list of the top ten reasons why businesses fail, the sixth of these was adding new products that drag down the profitable ones. The risk of this occurrence is eliminated through product expertise.

The second most important step of effective product diversification is selecting products that complement your core business. For instance, auto glass installation companies would be advised to find products that relate to the automobile and, going even further, that relate to auto glass. Examples might be wiper blades or glass cleaners. This is important because it allows you to focus on one category of customers, which simplifies marketing and training and reduces selling costs.

The third element of effective product diversification is employee training. People within your organization must understand every element of product diversification, such as its importance and the role it plays in creating success. Next, they must be trained to sell the product and then receive proper management support to make it happen. Finally, management must measure each employee’s success and create proper forms of recognition.

Persistence
Persistence also plays an important role in product diversification. From my own assessments of companies that have not done well in product diversification, I’ve found the first reason for failure often is that a company has no other products to sell. The second is that there is no persistence in the sale of the additional products. One company in Pennsylvania did poorly with its additional product sales and, following my review of the company program, discovered that the only thing missing was that the company’s employees were not promoting the product with every potential customer.

Once the proper training and measurement procedures had taken place, they sold add-on products to 71 percent of their customers. Keep in mind that a customer willing to buy a core product from your company is six to seven times more likely to purchase additional products and services than someone who is merely shopping; make sure to take advantage of this selling opportunity.

All four of these points are critical toward benefiting from product diversity, but, again, should be followed in their written order to ensure that your time spent in growing your business yields rewarding dividends.

Carl Tompkins is the global marketing resources manager for SIKA Corp. in Madison Heights, Mich. He is based in Spokane, Wash. Mr. Tompkins’ opinions are solely his own and not necessarily those of this magazine.

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