Do you know a business owner who is lamenting the current state of the economy? Are they talking about how their business is on life support and they don’t know what to do?
Are you one of them?
Lee Iacocco said, “In times of great stress or adversity, it’s always best to keep busy, to plow your anger and your energy into something positive.”
The companies that seek out different market segments are the ones that will survive this environment. How do they do it? They look at their product or service and then at their current client/market base. Then they take a step back and ask – Is there another segment that could use my product or service? Can I adapt my process to open up another potential client pool?
According to a May 4, 2009 article in Crain’s Cleveland Business, companies like Wright Tool Company are exploring different market segments like advanced energy and medical technology. Retail locations like Next Energy Store of Kirtland, Ohio are looking for new products to sell.
These companies are looking for ways to continue to provide value. When their current prospect base started to dwindle they stepped outside of their situation and considered alternatives. They got creative and found other markets to prospect in; they found new prospects.
In early 2008 Tree House Gallery in Olde Avon Village, Ohio opened a branch store called Sassy’s to cater to female consumers. While Tree House Gallery sells antiques and home furnishings, Sassy’s offers jewelry and accessories at reasonable prices. The owners realized that people were slowing down their purchases of higher ticket items. At the same time they knew that women will continue to buy lower cost accessories that make them feel good.
Think of it this way – when you are saving your pennies and thinking about every purchase, it’s nice to mildly splurge by buying yourself a trinket. There’s something about an item under $20.00 that makes it attractive. It’s something you can justify. Sassy’s offers just that range of items. So, while revenues may be slightly down for Tree House, overall the company is doing quite well thanks to Sassy’s.
What do all of these companies have in common? They understand that if they continued to do what they were doing they’d die. When death isn’t an option, the creative juices flow. It’s a decision business owners are making everyday – diversify or die.
Where do you stand? Is it time to strategize? You don’t have to go it alone! Include your staff, associates, and friends in your brainstorming. You never know what someone will come up with. The key is to know you CAN diversify; you CAN be creative and find new avenues for growth.
Good economy or bad, it’ll be one of the best things you do for your business.
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About the Author: Diane Helbig is a Professional Coach and the president of Seize This Day Coaching. Diane is a Contributing Editor on COSE Mindspring, a resource website for small business owners, as well as a member of the Sales Experts Panel at Top Sales Experts.
At Enhance a Colour, we agree completely with your idea, and have been searching out new opportunities in additional business segments for years. The challenge is always realizing you need to make the time to take the first step backward, evaluate your position, and spread out into new directions. Beyond just customer diversification, we’ve seen our product mix diversify as well, moving from having a single product represent 80% of our sales to having 5 products make up the same percentage. A bad economy just presents new opportunities.
I think that plenty of people in the auto industry and other manufacturing companies should read your blog post…
Companies need to realize that if the ship is sinking, they need to take action to keep it afloat. Being stubborn and sticking to your guns insisting that consumers will come back around isn’t very realistic. They should do everything they can to entice consumers. If that means creating something like Sassy’s, than so be it. It’s either that or close your doors. Seems like an easy choice to me.
Martin, LOL 🙂
Spot on – especially exploring other “market segments” – even tiny niches. Also see the same thing in a different way that’s more valuable to customers. For example, sell useage not products suggests C. K. Prahalad (his example = tires) speaking on growth through disruptive Innovation at the World Innovation Forum. Any size or kind of biz can benefit from his compelling approach. See http://us.hsmglobal.com/contenidos/wifhome.html
One of the problems I’ve seen with small businesses as business slows is the fear to change or to take on more risk. I’ve worked with clients who are unwilling to do anything different – they just want to hang on until times get better. But when the economy picks up, even if those businesses are still around, they will have lost ground against their competition. It is a do or die environment!
Diane, you’re absolutely right! We can always find creative ways to find new avenues for our business to grow. If other readers here could remember, small business trends came up with creative tips for saving money and growing your business. What was good about that because those tips actually are from readers of small business trends too.
Hey that post showed the same problem in light of new things. Made a useful read.
I agree your comments reminded of the similar examples.
All the comments added on to the article as well
as an internet marketing and social media coach in the network marketing profession, I hear all the time from people who are hesitant to embrace social media or new technologies but the reality is that they have to like you point out here or they will eventually be out of business. Times change and you and your business must change with the times.
B Smith @ Wealth and Wisdom
Diane-It is important to be open to opportunity, but I find it is often a mistake when companies attempt to diversify to other markets. This is only multiplied when they are in an economic crisis.
Finding new customers is expensive. It is often a better use of resources to focus on your existing customer base. What can you do to better fill their needs? What can you do to solve their problem? This will improve your product / service, increase sales to existing customers, and find new products / services to sell. All of this without incurring the cost of courting new customers!
Another simple thing to do is find customers similar to your top 20%. How do you do this? Ask them (your golden customers) for referrals. A hot lead like this is infinitely more valuable than cold calling a new industry.
You are so right – it is important to diversify. But there is a difference between choosing and targeting another market that will value your offer and being all things to all people. Small businesses should be careful in making sure that they choose a niche that is complementary to what they do so their resources don’t get sucked dry. Another thing to research is the barriers to entry into new markets. I was asked to transition some automotive products into the medical device market and the company didn’t realize that they needed at least 24 months before their products could be approved by the FDA for use in medical devices — ouch!
yes, I am one of them and an diversifying to survive. But, it is uphill both ways and finding a growing market is very, very challenging.
I like this idea and the way you explained it. You’re the bloodhound on the scent of a new trend. I’ve been hearing more people talk about how important it is to diversify, to spread out into other related niches, to add new products/services.
Rieva Lesonsky, former bigwig at Entrepreneur magazine, has been talking about this. And I am active with Biznik (like LinkedIn), and some of their authors are saying similar things. I’m glad you’re writing about it here at SmallBizTrends.
You’ve highlighted some smart people doing smart things. Thanks again!
Thank you all for your great comments! I just love the dialogue that this article has started. Believe me, I know it is hard and sometimes tricky to diversify.
And I am, in no way, suggesting that anyone should try to be all things to all people. I am always counseling my clients to be careful – to target market.
Once you’ve penetrated your current clients as far as you can and you’ve done all you can for them, it’s time to expand your thinking. At the same time, if your current product or service is not as attractive as it used to be because of the economy, you should consider exploring other avenues.
As many of you have said, it may be hard but it may also be the only way to survive the storm. And, as Kris B has said, even if you survive without adapting you will not be as far along as those companies that adapted well.
I’d also like to thank those of you who shared this article with your networks.
In this economy, every decision becomes crucial. Those who think outside of the box will definitely prosper and seperate themselves from those stuck in the mud. Every now and then, as business owners, we must be willing to open the gates of our minds and let fresh ideas take our dreams in new directions.
Diversification is the key to success
Like Charles Darwin said, ‘adapt, migrate or die’. This is an important fact for modern businesses to understand, along with the cyclical nature of markets, in order to plan the use of resources and expertise accordingly.
Smart examples of diversifying Diane – thanks. Sassy’s, for example, leveraged its one’s core experience in retail, to reach out to a niche that overlaps its current niche (women) and to respond to a situational interest – women who want small splurges in an uncertain economy.
I agree and I’m passing this link on to my clients. For several months I have been giving my clients, that come for advice on surviving this recession, the same advice. Government contracting can be an alternative, exporting or finding new markets outside of the automotive industry are some of the suggestions I offer.
Hi there! Great idea, but might this actually do the job?
I agree with the post. The one thing I would suggest is that small business owners diversify in related ways. It’s not a good idea to stray away from core competencies. Most companies must have some type of focus.