13. Diversification

The next criterion that allows distinguishing strategies types of introducing a new product is the criterion of merging three sections: innovation, marketing and technological orientation. These are called strategies for diversification and they are combinations of these variables. There are the following strategies: extension of the products’ line, a new generation of products, marketing products’ distinction, segmental product diversification, horizontal diversification of the product portfolio, conglomerates diversify the portfolio of products and concentric diversification of the product portfolio.

Product line extension strategy is usually used to introduce a new product which mission is to fit into the client’s taste better. Often the strategies that companies use when they already have in their offer similar products and note niches associated with the same need or changes in customer preferences. Marketing programs that have successfully been applied do not change. However, the change need to be mentioned and the benefits associated with it.

The new generation strategy of products is usually associated with a new technology which allows to produce a new generation of products. The technology enhances the product’s functional characteristics, which increases its value to the consumer.  It requires intensive promotional activities, which should aim for showing the changes in functionality, usage and characteristics of the product.

  The main objective of the marketing strategy of product differentiation is to get a new image of the market. This is related to the corresponding positioning of the product or changes in the company’s product portfolio management. This product can be highlighted through new packaging, a different form of sales or other physical or functional characteristics which aim is to give a different value of the product to the customer.

Another strategy is the segmentation strategy of product differentiation. The main assumptions of this strategy are as follows: product development technology is still the same, but the components are changing.

Thanks to differentiation of functional product company can better respond to customer needs more effectively and different market segments which are associated with it. It is an effective method that allows, by means of the slight change of the company’s resources, to match products to a larger circle of recipients.

The use of horizontal diversification of the product portfolio during the introduction of a new product on the market is based on placing new product in the portfolio addressed to the same complementary audience that meets the needs of the group. Market requirements, market situation and the determined objectives defines marketing tools. Using this strategy customers’ needs should be well known. It is used by the companies which product offer is focused on a specific group of recipients (having common characteristics such as passion, hobbies), and strive to fully satisfy customer preferences in this regard.

Conglomerate diversification of the product portfolio is based on a very clear differentiation of the portfolio in terms of fulfilling needs of market participants. They can be performed by large companies with significant financial resources and extensive financial experience. The introduction of the product often does have any connection with the existing technology and marketing experience of its products’ portfolio.

Strength, resources, and position of the company allows to reduce the chance of new product failure. The company should pre-investigate the attractiveness of the market, the profitability of operations in the next few years perspective and the current situation in the sector.

In concentric diversification of the product portfolio a different technology and different marketing tools are utilized. Products, in spite of their diversification and their different uses, are addressed to the same group of customers. The literature often cites the example of shoes and points to the synergy effect of marketing which can be achieved in this strategy. This product is addressed to the same group of customers which leads to the situation that the company can use the same distribution channels, knowledge of the market and the effect of experience.