When it comes to expanding your product line, what’s most important? Variety of sizes? Wider range of price points? Broader mix of new flavors? In the specialty food business, it can be a combination of all three. But no matter how far you take it, make sure you add value when you add new products.
First, be clear about your motivations. Are you adding new products to fill a gap in the market, match the competition or meet a customer need? Master marketer, Starbucks, has taken the concept of brand expansion to a new level, but not because they wanted to add an unlimited number of products to their ever-expanding line. They created a mix-and-match product line as a way to sell “personalized” coffee.
Second, touch base with your customers, not your competitors. Just because one of your competitors decided to add “kiwi-flavored” olive oil doesn’t mean it will be a best seller. Unlimited opportunities to build conversations on your website, Facebook or Twitter can involve your customers in the process. You may be surprised by what they tell you. Listen.
Third, do the math. The cost of adding a new product to your line can be substantial – both in direct costs and below-the-line expenses. A simple cost analysis with conservative sales projections will give you the baseline to judge the merits of adding another product to the mix. Refer to our resource section on creating a Business Plan for a simple approach to determining pricing and profitability.
Fourth, make sure your chain of distribution is open to giving you another SKU. If you are in demand, chances are you can request space and get it. If you are new to the industry, not many retailers will take a chance by giving you more space without evidence you are already selling well. Test the waters by engaging some of your best sources of distribution for their opinion.