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The Pros and Cons of Selling One Product

April 8th, 2011 04:00 admin Leave a comment Go to comments

soldsticker.jpgMost startups start small, thinking to expand after learning some valuable lessons, including making sure they’re not releasing bad products that could sink the company or making bad decisions that could do the same. Toward that aim, most startups focus on building one product at a time, which may be their only product for the first several years of the business.

But there are pros and cons to selling only one product. For some startups, it may make sense to stay focused on one product, where others would be happier and more successful if they sold multiple products.

The Pros of Selling One Product

Danny Wong is the co-founder of Blank Label Group and runs the e-commerce startups Blank Label, Thread Tradition and RE:custom.

Focus: You get to narrow your focus on creating one really awesome product. Without all the distractions of building, managing and selling multiple products, you get to really hone the finer details of your main offering, making it much better than any others in the market. It also allows you razor-sharp focus in your marketing tactics, in picking the highest quality channels and in sourcing traffic that quickly converts into happy customers. Being Niche: You have the ability to be incredibly niche, and instead of building a product that serves all, you can build a product that is serving an under-served market exceptionally well. Targeting the long tail of the market can lead to great success because you will be able to easily capture most of those who feel under-served. Being Efficient: With razor-sharp focus on one product, targeting one type of consumer, you can rapidly develop your product rather than splitting your efforts across multiple channels. In fact, you get to really know your customer, becoming more sensitive to their changing needs. At the same time, you become agile enough to reiterate your product offering to cater to those needs.

The Cons of Selling One Product

No Cross-selling: When you only have one product, you can’t multiply your revenue by cross-selling complimentary products to your already-existing customer base. Doing so increases the lifetime value and average order size to your company, improving cash flow and increasing your marketing budget.

Companies selling one product can’t easily sell anything more than more copies of the same product. Although some smart businesses partner with other companies selling complimentary products to cross-sell and share revenue, that’s a tricky relationship and won’t generate more revenue than you would if you sold those products yourself.

Fewer Return Customers: People only need so much of the same thing. Unless you’re constantly innovating and updating your product offering, making it drastically different from and better than the last, it will be hard to incentivize customers to return. This will limit the revenue you can make from your customers. Fewer Marketing Opportunity: While you can certainly sell a single product and live comfortably, running a $1 million-plus company, it’s a bit hard to find opportunities to market to your customers. There are only so many quality channels you can tap into to effectively target your niche. To reach your full market capacity, you would have to engage in more general marketing tactics, which are costly and inefficient.

What’s your preference on how many products your company should sell? Would you do better if you were narrowly focused on making one awesome product? Or can you benefit a lot more from selling several different products?

Photo by ahylton

Source: The Pros and Cons of Selling One Product

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