Smith and Wesson has long been a strong, recognized brand for handguns, with the added benefit of a strong customer base. In 2002, however, the company unsuccessfully launched a line of mountain bikes that soon turned into a flop. Customers had said in a survey that they trusted the brand so much that they would be willing to buy products other than just handguns from them. However, this was not completely true and the launch failed. In retrospect, most of us might think “who would buy a mountain bike from Smith and Wesson?” This is a great example of the importance of choosing the right product mix for your business.
A problem that many entrepreneurs run into is getting too excited and distracted by too many products, and lose a sense of the core business. They offer too many products and services, to too many different types of customers, in too many different markets. This more often than not leads to confusion and decreased profits.
A helpful way to approach deciding on a product mix is considering your company’s driving force and management expertise. Reflect on the driving forces outlined by Entrepreneur.com below and how they relate to your business.
- A product-driven driving force means that you focus your efforts on selling particular products to as many customers and markets as you can reach
- A market-driven driving force means that you focus your efforts on targeting a particular market, selling whatever products they will buy
- A method-of-sale concentrates on a particular sales technique and seeks products that can work well with your method. Door-to-door sales is a great example of this. It works well with pest control, alarm systems like Vivint, and a few other products, but good luck trying to sell cars or other consumer goods this way
- A technology-driven driving force focuses on a special or unique technology that your company offers
- A profit-driven force focuses on any product that has the potential to produce high returns
Choosing the Right Mix
When considering new product lines, you should constantly go back to your core business and evaluate what kinds of products you can build onto your current mix. Your core business will account for 80% of your profits, so this part is paramount. Choose products that meet your expertise and driving force. Smith and Wesson mountain bikes failed because customers didn’t relate with it. They were used to handguns, and had trouble connecting the brand to bikes. Look for products that build onto others and can be sold to existing customers. Pepsico doesn’t try to get into the clothing business, and GE doesn’t sell ice cream. These are extreme examples, but you get the point.
Conducting regular profit analyses can help identify what is successful and what is not. Your ability to continually analyze your product lines and profitability will be key and will set you apart.