The new coronavirus changed our lives.
And that includes closing our businesses. While some countries are doing a good job supporting SMBs, and while there are sectors that didn’t take such a bad hit as travel did, one thing’s clear: this recession will get worse before it gets better.
However, there is a silver lining.
You can use diversification to help stay afloat in these hard times. If you do it right, you can even recession-proof your online business for good.
But before we get to that, let’s understand…
How Bad Is The Situation?
Did someone say recession?
I did, and it wasn’t a typo. We are officially in a recession, and the US economy specifically seems to have been badly hurt. If we’re to take all financial metrics into account, it also seems like we’re headed towards even rockier roads.
With a nationwide surge in coronavirus cases for the US, the crippling state of a lot of Latin American States, and Eastern Europe’s poor management of the crisis, it does look like the wait for the vaccine won’t be pretty.
The first quarter of 2020 had a drop of 5% in production for the US. Unemployment is at an all-time high since the Great Depression.
Photo by the Economist
So we dare say: it’s pretty bad.
But there is a silver lining.
OK, maybe not a silver lining, but at least some silver spots here and there.
Any recession has an important characteristic: it affects certain industries, and certain people, differently.
And never has this been more clear than with the CoVid crisis. Travel companies (and travel sites by extension) took a huge hit. Airbnb CEO declared that he almost lost everything he spent years building in a mere 6 weeks time.
All this while medical supplies were selling better than hot dogs at a Saturday night game.
All this while companies like Z-Skin boomed.
And I hear you saying:
“What if my industry gets affected the worst?”
“What if my clients have it worse?”
That’s where diversification comes into play.
What is Diversification?
“Diversification is a corporate strategy to enter into new products or product lines, new services or new markets, involving substantially different skills, technology and knowledge.”
But it’s pretty intuitive, right?
The thing about diversification is that you don’t pursue it like you would a new client you want to sign. You need new skills, new insights, new people, and even new money to invest in diversification.
Here’s an example to hammer the point home:
Disney was founded in 1923 and its team created one of our most beloved animated characters. However, in 1955, with help from people experienced in amusement parks, they also launched the first Disneyland.
But it doesn’t have to involve huge amounts of money and a new team onboard.
Your corner supermarket stocking up on disinfectant and face masks is a form of diversification, especially if they rearrange their products on the shelves to incentivize purchase of those goods.
A lot of online businesses adapted during the lockdown and started selling personalized face masks. Even Jason Momoa made his own line.
Well, he donated all profits to charity.
But it’s still an example of diversification.
However, you need to keep two more things in mind:
First, diversification poses an increased risk. If you were selling vintage game consoles and you suddenly started distributing hand sanitizer with a little Mario on it, your audience might not be into it.
Which will cost you a lot of money.
Second, you should start with a product or market extension. This is a lighter form of diversification, and it works like this: let’s say you have a street food store selling only french fries. Full on diversification could include selling beef along with the fries, while a product extension only means selling baked potatoes too.
The french fries store wasn’t a fabricated example, they’re actually popular in Belgium.
So now that we’re on the same page let’s see how you can use this information.
How To Apply Diversification To Your Online Business
Jumping on the trends is good, but it shouldn’t be your default.
Remember: you’re not trying to make a quick buck out of fads, you want to recession proof your business.
With that in mind, let’s see how to use diversification.
#1 Do Your Research
You want two things before moving to an industry.
First, you want to be seen as an expert in the market you’re expanding to. Research the big players, the trends, the products that stood the test of time, and make sure you keep them in mind when you choose:
- A product
- A message
- A market
- A team to help with the expansion
If you’re into affiliate marketing and you think about expanding to a new niche, read our article about the best niches for affiliate marketing. With the uncharted economic land ahead, it’s more important than ever to choose the right niche.
Second, you want to actually create value for your customers. If you do a product expansion rather than a full on shift to a different market, your current customers will be the first adopters.
Even if that’s not the case, you don’t want to enter a new market with a poorly-reviewed product. Take the time to understand where you’re moving towards, and plan your moves carefully.
For example, if you were to come out with a face mask that’s just an over glorified polyester piece of fabric with some drawings on top, it might sell.
For a while.
Then people are going to abandon you for a mask that goes for a similar price, but actually ensures protection through superior filtering technologies, and maybe has a better design too.
Stellar products don’t appear out of the blue.
Research breeds them, so do your due diligence if you want to diversify. Talk to your ideal customers, talk to businesses in the niche, look at the numbers.
#2 Think Your Message Through
Let’s say you had an affiliate website promoting pets-related products.
Don’t just stick a banner saying you’re now launching an online platform to help owners find dog walkers that take social distancing seriously.
Default to your company’s strengths.
Understand why people choose you.
Build a clear buyer persona.
And use that to kickstart your diversification messaging. More practically, this means you should analyze these past few months in detail. See what products sold well, and to whom. Crunch the numbers, do A/B testing for different types of marketing messages and follow the numbers for all decisions.
#3 Think About Hiring New People
If you’re making a big shift in your offer, you might want to consider hiring someone who can help with that shift.
Let’s say you used to create content for people that want to enhance their email marketing campaigns. You slowly started going into other topics as well and you’d like to expand into the world of SEO as well.
You might want to commission a new writer for that content.
Someone with experience in that niche, because their expertise will help you position yourself better.
If you’ve been doing anything offline, and you want to create an online course about it, you might want to work with an agency specialized in launching online courses.
It doesn’t even have to be a new full-time employee, or a full-service expensive agency. You could just hire a consultant to get a grip on the market you’re expanding to.
The thing is, if you want to:
- Send the right message
- Choose the right niche
- Build the right product
- Find the best clients
When you diversify, you’ll need the input of an expert besides all of that research.
If you make sure you cover all of that, just rinse and repeat for new products and markets as soon as you have a strong standing in the market you just expanded too (see Amazon or Google for a successful rinse and repeat). With every new expansion, you have a higher chance of surviving recessions.
And The Good News
Is that you can pull this off.
Small instagram influencers did successful 180s with their content to sell face masks.
Diversification works, and it can recession proof your business.
But take it slow and do your due diligence.
Oh and make sure you tell us all about your diversification plans in the comment section below!