Optimising the product range

methods and strategies for effective expansion

Advantages of product diversification

Increasing market share
Diversification allows a company to capture new market segments and attract additional customers. Introducing new product lines helps expand the target audience and increase sales volumes.
Risk reduction
Companies that rely on a limited number of products are exposed to high risks in the event of changes in demand or the emergence of new competitors. Diversification mitigates these risks by distributing income across different product lines.
Enhancing competitiveness
New product lines enable companies to remain competitive and offer their customers more options. This is especially important in a rapidly changing market and amid constantly growing competition.

Related diversification involves adding products that are closely linked to existing goods or services. This can include expanding the product line within a single category. For example, a company that manufactures household appliances might start producing additional accessories for its devices.

Unrelated diversification involves introducing products that are not connected to the company's current range. This may involve entering entirely new markets. For instance, a company engaged in electronics manufacturing might start producing home goods or even food products.

Types of product diversification

Advantages of vertical expansion

Meeting diverse needs
Adding new variants of existing products enables a company to more precisely meet the diverse needs of customers. For example, a smartphone manufacturer might offer models with different specifications, such as memory size, screen size, and features, to cater to various target audiences.
Enhancing customer loyalty
By offering improved versions of products, a company can increase the loyalty of existing customers by providing them with higher quality and more functional options. This also contributes to increasing the average purchase value, as loyal customers are more likely to buy upgraded versions of products.
Increasing sales volume
A diverse product line helps attract a wider audience, leading to increased sales volumes. Different price categories and functionalities allow the company to appeal to both budget-conscious and premium buyers.

Introducing new models of existing products that may include improved features, additional functions, or new designs. This approach attracts consumers who are looking for the latest innovations and enhanced versions of products.

Types of vertical expansion

Introducing more affordable versions of products that offer basic features and quality at a lower price. This helps attract buyers who cannot afford the premium versions but still want to benefit from the essential features of the product.

Developing premium versions of existing products using higher quality materials, advanced technologies, or exclusive features. This strategy allows the company to enter a higher price segment and increase profit margins by selling products with a higher markup.

This involves adding products to the existing range. For example, a cosmetics manufacturer might add new shades of lipstick or additional skincare products. This approach provides customers with more choices within a single product category.

Types of horizontal expansion

Companies can create new brands to target different market segments. For instance, a clothing manufacturer might establish a separate brand for sportswear to cater to the specific needs and preferences of a distinct target audience.

This involves developing products that complement the company's existing items. For example, a household appliance manufacturer might start producing kitchen accessories that enhance the main product line. This helps create a comprehensive offering for customers and increases the sales of complementary items.