Diversification of service offerings is a buzz phrase at the moment, and for good reason. Businesses are expanding their range of products and services so their attractiveness to customers is retained and their customer service proposition is strengthened. Expanding their reach also helps to ensure the business owner benefits from additional sources of income to help see them through the challenging years ahead. So how can you diversify your business to survive the downturn?
There are three very important benefits of diversification that you must first be aware of:
- It broadens your offering, making your services more attractive to more customers;
- It mitigates lost revenue streams and allows continued involvement in business; and
- It creates annuity streams and provides you with an asset that you can capitalise on when selling your business.
Diversifying allows your business to better cater to your customers’ needs while helping to guarantee its ongoing success.
In a volatile economic environment (granted, it is slowly improving), assuming that your industry and your customers will return to the ‘normalcy’ of previous years can be dangerous. Some businesses have emerged as new leaders, while some have downsized, consolidated or disappeared altogether.
At the same time, Australians have become more cautious about how they spend their money, especially when trusting it with new players. This gives established businesses an advantage with both current and existing customers.
What every business owner should consider carefully is consumer sentiment. How are your customers feeling about their current situation and their future needs and wants, and how can you capitalise on this?
If you can adapt and expand your business to provide more solutions – becoming more of a ‘one-stop-shop’ – and you do it well, you should see growth and the potential for more to come. In an increasingly time-poor society, customers greatly appreciate convenience. Isn’t your duty of care to customers to give them the knowledge, support and range of quality choices they need to make a number of informed decisions? Who better to help them than you? Of course, you need to take the time to educate yourself on your business’s additional products and/or services then continue to keep your skill level at prime.
At Mortgage Choice, one of the major goals we have with the recent diversification of our offering to include ‘non-core’ products such as risk insurance, asset finance and commercial loans is the potential for extra income for our franchisees – each of whom are small business owners – and for the company as a whole.
Our customers benefit because they can access a wider range of services all from the one contact point and often within the one meeting. This, in turn, demonstrates our commitment to the duty of care we have to customers as their provider of financial solutions. The importance of this should not be underestimated.
Of course, any new product or service must be a good fit with your current offering. Your goal by diversifying should be to provide add-ons that make sense, and complement your current customer service proposition.
With any change comes a transition period and every small business owner needs to manage that carefully. Early adopters enthusiastically jump onboard while others take a more cautious approach until they can clearly see how their business will improve thanks to the change.
“It might not work” is no reason to not go ahead and give diversification a try. Think of the possibilities.
International marketing guru Seth Godin recently said: “In most interactions, we take a defensive posture. We try to defend the brand, or our turf or our job. The problem with defense is that it’s static. The best way to get smarter, to embrace and to cause change and to triumph in times of market turmoil is to adopt the scientific method. Ask yourself, ‘what do I believe that’s wrong? How can I change the way I do things? What works? What doesn’t?’ If you enter a conversation looking for something to test, measure and ultimately change, it’s likely you’ll find it. That change makes you more competitive, and you continue to cycle past your competitors. On the other hand, if you enter a conversation concerned about maintaining the status quo, it’s likely that this is exactly what you’re going to do… create a culture of testing and inquiry that can’t help but push you forward.”
So, maintain your core proposition if that is what you have built your reputation around, but think about taking on suitable additional products and services so you can deliver additional income to your business and help guarantee its survival. Every time you broaden your scope and do it well, you will empower yourself and your staff as well as your customers.
Expand your horizons by working hard to identify a wide range of opportunities – add-ons, affiliations, acquisitions, etc – that make sense; that add value and help you improve your superior service. Most customers will react positively to news that one of their service providers is so passionate about their business and forward-thinking that they are endeavouring to expand and evolve.
That’s the kind of business person that people like to be connected to; not just customers, but people you network with, referral partners, staff and even friends. That’s the kind of business person that features heavily within industry and community conversations. Searching for a better future, a better way of ‘living the dream’ in business will get people talking about you, wanting to know more, seeking you out.
The ease of transition into diversification relies heavily on self-education and communication with your networks, plus an understanding of the opportunities for growth that arise from moving down this pathway. Think outside your usual boundaries and you might be surprised at the opportunities that have been in front of you all this time.
Often, through diversity comes the biggest wake up calls.
More wisdom from Seth: “You’ve probably seen it. The fish monger sees a decline in business, so they have less money to spend on upkeep and inventory, so they keep the fish a bit longer and don’t clean up as often, so of course, business declines and then they have even less money. Eventually, you have an empty, smelly fish store that’s out of business. As Tom Peters says, ‘You can’t shrink your way to greatness,’ and yet that’s what so many dying businesses try to do. They hunker down and wait for things to get better, but they don’t.”
Think long term and reduce the dependency on your current, smaller service offering.
– Kristy Sheppard is the senior corporate affairs manager for Mortgage Choice (www.mortgagechoice.com.au)