One of the most dangerous practices in marketing is product diversification. Encouraged by CEO’s, accountants and shareholders, such strategies are implemented in the name of value adding, maximisation, potentialisation, use of by-product etc. It is revered as a panacea for easy growth and profitability.
Strategy is often perceived as the domain of the left brainers; logistical, scientific, analytical. This is absolutely understandable but what is not so logical is the dismissal of the marketing department and the right brainers from many strategic decision making. Product diversification is one decision that must never exclude the marketers if one wishes to avoid ‘friendly fire’.
In war, with perhaps the exception of victory, almost everything is tragic but nothing is so devastating as being damaged by your own weaponry, and if one does not create a well balanced strategem, that is exactly what will occur.
There is no better example of this than the once great ‘Quaker’ company. For those who do not know, ‘Quaker’ once held the number one marketing position in the world for packaged porridge. While today, porridge may not be the most popular breakfast cereal, in it’s day ‘Quaker Oats’ was the proverbial glamour brand. In fact it was ‘Quaker’ who owned the generic rights when one would not have porridge for breakfast, but ‘Quaker Oats’. So what happened to Quaker and why did they lose their way?
In 1970 ‘Quaker’ management became tired with the mundane business of oatmeal and pancake mixes and diversified into toys and restaurants. They took their eye off the core product ‘ball’ and within a year or two found themselves with only equal shelf space to its major competitor – an unheard situation for ‘Quaker’. As its shelf space diminished its positioning declined and between 1970 and 1978, ‘Quaker’ produced only one new product. Today ‘Quaker’ is a shadow of its former self – a victim of its own badly planned strategy.
The story of ‘Quaker’ is complex and the reasons for its strategic failures are many, but it is an absolute lesson for those who believe that ‘Product Diversification’ is the definitive answer to growth and increased profitability. To those who are planning such a strategy, here are some important factors which should be considered before you tread forth into what can be a minefield.
1. Consider your culture and ask the question, “Are the new products culturally compatible with our personnel?”
2. “How will consumers perceive our brand once we have declared our new intentions?”
3. “Will the new product diminish the credibility in the existing product?“
4. “Do we have the resources to ensure we maintain a greater level of service and quality in our core product, while the new product is being projected?”
Most importantly, consult the right brainers, consider the consumers’ perceptions and when you’re totally convinced you’ve got it right – think again, because when you’re under friendly fire, there will be no time for proactive strategic thinking as you hide away in the bomb shelter.