tips for quality service
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.
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
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.
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 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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No reproduction of any type without expressed written permission.