Even if your manufacturing company has been successful at selling its current line of goods, it's probably not smart to keep producing the same products indefinitely. Now, in fact, is an excellent time to expand your product offerings.
With global competition ramping up, the manufacturing market is only becoming more crowded and less certain. By anticipating customer needs, you can fortify your position and help ensure continued profitability.
4 Reasons to Consider Expansion
You probably know your market inside and out and take pride in the fact that customers are satisfied with your current products. Unfortunately, this may not be good enough. Here are four reasons to consider product line expansion:
Life cycle limits: Most manufactured goods have a limited life cycle. If your company makes products that have already passed through the introduction, growth and maturity stages, they're probably on the decline. Products enter the decline stage when they no longer meet customer needs or their performance pales compared to new goods on the market — particularly if those new products rely on improved technology.
To avoid being left behind, stay on top of technological developments and upgrade accordingly. If you haven't turned out version 2.0 or 3.0 of your flagship product yet, it's probably time to do so.
Different market sectors: Expanding your product line enables you to tap new markets and service new industries. A men's dress shoe manufacturer, for example, could expand its product line to include casual footwear. Or the company could customize existing products for a different target market, such as adolescents. Market research can provide insights into what products consumers or business customers are demanding and what they're willing to pay.
Customer needs: Customer needs change over time, requiring manufactured goods to change with them. Encourage input from customers by distributing surveys and tracking comments on your website and social media accounts. Make sure you follow up and respond directly to customers with suggestions, concerns or complaints. And before you start investing money in new products, be sure to assemble focus groups where you provide potential customers with product previews.
Customer loyalty: A solid list of repeat and long-time customers is a hallmark of a successful business. With an established customer base, you can add products or variations of existing products without putting much additional stress on your marketing budget.
Research the purchase history of existing customers to identify products that competitors are currently supplying. For example, a manufacturer of construction equipment can develop new products that offer greater variety and innovation to crews in the field.
READ MORE: Manufacturers: Are you Ready to Start Exporting?
Secrets of Success
Let's say you've decided to pursue product line expansion. How should you go about it? For starters, do your due diligence. Solicit customer feedback to ensure a market exists for proposed products.
Also make sure any proposed products make sense from a financial standpoint. Given operational or supply chain constraints, can you make goods cost-effectively? What kind of gross margin and break-even point are you looking at? Will you need to invest in new equipment to make the new products, or do you have excess capacity to handle the orders with your existing equipment? Likewise, are your existing distribution channels up to the job or will you need to hire sales representatives or build a new e-commerce site?
It's also important to address macroeconomic factors. Everything from sluggish consumer spending to rising interest rates to foreign tariffs could make launching a new product now difficult.
Make sure you keep an eye on the competition, too. Clothing manufacturers have long used competitors as a resource by modeling new designs (with tweaks) on already-successful ones. Sometimes, jumping on current trends is easier and less expensive than attempting to create new ones.
Creative Solutions
Many manufacturing companies begin to decline because they keep producing the same products they've made "forever." To remain competitive, monitor customer trends and technological advances and respond with goods that are desirable in today's marketplace.
Look for creative solutions — even those outside your field. For instance, an aerodynamic design or stitching technique that works for making sports equipment might be co-opted by a furniture manufacturer. At the very least, investigate any promising new ideas, regardless of their origin.
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