With the growth of e-commerce ‘we’re-doing-it-all’ giants, we’re seeing the boundaries of their products and services tested regularly. There are many success stories showing expansion into new markets (think Snapchat dipping their feet in the retail sector when turning their social media-famous dancing hot-dog filter into an $80 Halloween costume for sale on Amazon). If you’ve already bought your costume and are still reading, a closer look at service diversification shows that it’s not as simple as the likes of Google, Samsung or Amazon make it look. There is a thin line between introducing products that naturally complement a brand’s offering, and implementing under-utilised or overly-ambitious products that end up in disaster.
The retail market is littered with overly ambitious extensions that stretched businesses way past an acceptable level. We searched through academic papers (and the good old internet) to find some of the best (worst?) examples of service diversification fails in the sector. Here are our favourites:
Cosmopolitan made an unsuccessful bid for the food and drink market by attempting to bring out a line of yoghurts. The price point and lack of cohesion with their skill sets saw a protracted 18-month withdrawal and an undisclosed but “significant” expense to the company.
Back in the 80s, Colgate saw an opportunity in the frozen food market, attempting to establish a foothold with a range of diet microwave meals, sold as individual products and through a subscription service. The move proved to be a costly flop as customers struggled to make the connection – or perhaps made the wrong one. Did it all taste minty?
HMV identified an issue with their existing business model following disruption from digital sales and online streaming. In an attempt to offset pressure, the business acquired a string of music venues whose costly operational expenditure acted as a disastrous catalyst for the businesses financial trouble.
Coors attempted to crack into the seemingly lucrative bottled water market, following the 90s boom in demand. The main reason for the downfall is that Coors is a brand synonymous with alcoholic beverages, and that’s exactly what consumers assumed the bottles to contain.
Diversification that gains traction and doesn’t overshoot
Successfully diversified businesses utilise disruptive models, delivered through service excellence and strategic advantage that goes beyond the initial market offering. To make sure you land on the right side of the balance between diversity and profitability, you need to be able to identify and validate market opportunities that complement your skills first, before cementing your initial foothold in the new market. Intelligent diversification relies on an intrinsic understanding of how far you can push your brand and your business, and what skills and market knowledge you have to help you turn it into a success. Identifying and playing to your existing skill set is therefore imperative to successfully expand your current offerings. If done right, service diversification can generate customer excitement and deliver a creative set of revenue sources that secure the future by going beyond today’s obvious streams.
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