The first question an entrepreneur should ask himself when contemplating whether to extend his product range is “why would I do that?”
A good share of the entrepreneurs I know have a tendency to extend their product range in a very curious, opportunistic way. Whenever the market has more opportunities than suppliers, I see entrepreneurs deciding “Let’s do this, too. We can do this, why not doing it?”
For this reason, they end up developing unrelated products that eventually lead to parallel businesses, very time and effort-consuming for the small business. An entrepreneur should first be able to address the following two questions:
– why does he feel the need to take such step, launching a new product or service?
– will the product contribute towards a better strategic positioning of the company?
– will the product help sustain the company’s message for the target market?
Some other issues should be considered and answered too, before deciding to add a product to the company’s range:
– will the new product cannibalize the existing products?
– if a new product is launched, will customers still purchase the previous products?
– the new product’s market is a new one, or is it the same market as for the older products (is the business truly extending, or it is just being updated?). A business update is surely not a bad idea, but not if it comes as an unexpected result: the entrepreneur invests to extend the business and in return he only succeeds to replace older products with new ones.
Extending a product range should occur only when the target market is ready to buy something new. This is especially true on emerging markets, growing markets that need time to assimilate and learn new products, according to existing needs. If a product is launched too early in the market’s development stage, one should brace himself for failure, or at least for a costly adventure: marketing the new product can require more time and money than planned and expected. Extending the products range for a small business is actually a matter of inspiration rather than perspiration (read: “research”) since market research is often too costly for the small biz entrepreneur – thus extending the products range is a pretty difficult task: what products can you offer to people who are already buying?
When adding new products to the business, focus become the crucial aspect, and not the number of products being launched. If several new products are to be added to the range, they should be positioned for different targets and must be taken care by different teams. You can’t give the market two products at one and you can’t have one single team in charge of launching two products. Multiple products should be launched simultaneously only if the target market is large enough and there’s an equally large team to manage it.
Two frequent mistakes made by small biz entrepreneurs are lack of innovation and focus. More exactly, they might launch products that are too “down to earth” (read: “boring”) for an expanding market, or products that don’t comply with the overall business strategy and direction. If the launch of a new product was successfull, sales should get a boost, but if the launch failed withdrawing the product is probably the best option. A frequent syndrome when it comes of small businesses stretegy is that of buried costs: the entrepreneur insists on keeping a failed product thinking “something” can be done with it or else the money spent on development and launch are lost.
If the new product was a failure, it is theoretically possible to try a re-launch, a re-branding or a different communication campaign; though, most of the times it’s simply the wiser to just eliminate the product and cut the possible further losses.
To conclude, here are some major question a small business entrepreneur should ask himself before launching a new product:
– will the product contribute towards a better strategic positioning of the company?
– will the product help sustain the company’s message for the target market?
– will the new product cannibalize the existing products?
– if a new product is launched, will customers still purchase the previous products?
– the new product’s market is a new one, or is it the same market as for the older products (is the business truly extending, or it is just being updated?).
