While it may be tempting to focus on a few product offerings to really nail the proposition and offering, Be the Business spoke to five businesses not afraid to go big with their product lines to test and learn from customer feedback.
Choosing how many product offerings to develop, market and support is a key decision for any company – and it can have a significant impact on growth and productivity.
Despite some of the world’s best-known companies have a surprisingly small range of products and brands, such as WD-40 Co, for instance, major groups including Johnson & Johnson, Estée Lauder and Proctor and Gamble own a remarkable 182 different beauty companies with a staggering range of brands and products. Meanwhile, Anheuser-Busch In Bev is one of the largest brewers in the world, with a range of over 200 beer brands including Budweiser, Corona and Stella Artois.
To find your optimum product offering, does it make sense to experiment with lots of products and not only the ones you think will work at the outset? Having a wide range of product lines increases the chances of satisfying more customers and can improve productivity. However, each line needs its own development, marketing and support, and this can drive up costs. Balancing these two arguments, and creating and supporting product lines as quickly, cheaply and efficiently as possible, is essential.
Companies usually extend their product lines in one of two ways. They can vary one brand in terms of price and performance – think about a range of cars. This approach is known as vertical line extension. On the other hand, they can keep the price point roughly the same but just vary other aspects such as the product’s colour, flavour or size. This is known as horizontal line extension and you can see it with products such as Snack a Jacks, which offers customers sour cream, cheese or chocolate chip flavours among others.
It’s important to calculate the cost of producing another version of an existing product. Add to that marketing and, if it’s a tangible product, storage. Just-in-time (JIT) ordering and delivery allows companies to advertise a wide variety of stock and order new items a few times a week. Another business model in this space is “drop ship” – here the company is selling someone else’s product and simply taking a commission.
Trend-driven product offering
In the world of interior design it’s increasingly important to have a wide range of product lines, believes Martin Waller, founder of London-based interior design house Andrew Martin. With a turnover of over £12m, and growing at 25 per cent a year, it employs 46 people. “In recent years fashion houses, such as Zara and H&M, have moved from producing two collections a year to doing so every fortnight,” he said. “It’s a similar situation with interior design.”
The company is having to develop more additional lines to respond to consumers demands and tastes that are changing faster than ever. Consumers are also searching for individuality – and so smaller, niche ranges and smaller runs of products are increasingly popular.
“Consumers are demanding new products more quickly and so those products have a shorter shelf life,” he explained. “This has been telescoped from about four years to just a few weeks. It means that we constantly need to be innovating to get more products on the shelves. We also need to make sure that each product is more accurately targeted at the right consumers.” The situation has been made easier for the company because the fabric mills and other manufacturers that supply it are able and willing to produce smaller product lines themselves.
With this increasingly rapid turnover how do you then dispose of products that aren’t selling adequately? The answer comes in the form of the growing number of outlets that sell of end lines and leftover stock. These include T K Maxx and Overstock, as well as sites such as eBay.
Go where the customer wants
Even for those producing non-tangible products there are also challenges when it comes to determining the number of product lines. OrderWise, a software company, offers clients websites and trade portals, stock control, sales, CRM, business intelligence, store EPOS, warehouse management, purchasing, marketing and accounts.
“We’re also in the process of developing software that integrates with robotics technology – a venture that will lead to the next evolution of OrderWise, thus allowing businesses to benefit from greater automation within their warehouse,” said David Hallam, managing director of the company, which was founded in 1991, is based in near Lincoln and has a turnover of £9.6m.
Close relationships with clients help the company ensure that when it adds to its extensive range of products it is offering what those clients want. “Our sales process is very consultative, so our business consultants ensure they have a strong understanding of what each business requires before they present the final OrderWise solution,” said Hallam. “They will spend time reviewing a company’s current processes, the issues they are experiencing and what they are hoping to achieve. Once our consultants have this information, they then determine what OrderWise modules will provide the ideal solution for that business.”
React quickly, react informed
Greaves Sports is a Glasgow-based shop and ecommerce site selling sports gear for a wide variety of sports. Family run, it’s been in business since 1930. “We cater for all sports except hunting and fishing, so our product range is very wide. We wanted to be a real sports shop offering everything one needs to play their sport, whether that be a golf club to a squash ball to a set a football studs,” said Mike Greaves, the current owner. “We have to hold a large range of stock, which is a risk, but you can’t be a proper sports shop without offering all the nicknacks as well as your big-ticket items.”
Greaves and his team are constantly monitoring sales data so that they can identify where they have too much or little stock or too few product lines and act accordingly, using just-in-time delivery where possible. Having a close relationship with customers so that the store knows what to offer and customers know what to expect there is essential.
“We’ve been around for a long time and our consumer is someone who has a passion for their sport,” added Greaves. “The sports industry is very seasonal, so you have to react quickly to hot products and we are constantly talking to consumers to understand their needs.”
The company has also identified skews that can give it an advantage over the competition. For example, it does well with squash balls and football studs – items that a lot of the big sports shops don’t offer.
Customers want choice
Ecommerce site JewelleryBox, sees a wide offering as a way of differentiating itself in a crowded market. It has over 12,000 different product lines in its catalogue.
“As a new brand, when people land on our website probably they won’t be familiar with us, or out site. Therefore, we have a limited amount of time to ‘wow’ them before they visit the next shop down on Google, Instagram or wherever they have come from. When they land on our site looking for stud earrings for example, they will see 1,500 pairs of studs,” said director Alex McMillan. “Hopefully they see this and think ‘This site will have the perfect pair for me.’ They’ll then be more likely to stick and shop with us. We need to make sure this is the case, and a wide range of products is one tool for doing this.”
Nose studs have been particularly successful. The company, which was founded in 2014 and whose staff of 20 are based in South London, has 290 products available in this line whereas one of its largest competitors stocks just 31. “People want choice, they want to do their research and feel like they have seen a wide range of products and made an educated decision before buying,” said Mr McMillan. “We give them this choice without having to compare across multiple retailers.”
Having a large range requires some compromise between the percentage of items in stock and stock turnover, points out McMillan. “Aiming for 100 per cent stock holding, in other words, having no items out of stock, would likely lead to a massive stock holding cost, which for most businesses would be unsustainable. We have a fairly small warehouse, so we definitely don’t want to be in the position of having too much stock.”
Identifying the correct number of product lines requires research. Knowing your customers, understanding your market and identifying your unique selling point will all help. As Martin Waller of Andrew Martin puts it: “Having too many products lines is a risk but then again so is having too few. If you stand still in the current market you’re doomed. You’ve just got to strike a balance.”
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