By: Colleen Baird, Creative Director, LMCA
Covid has shed light on many things regarding the ways in which consumer needs change, adapt and evolve. Who would’ve thought one year ago we would be waiting in line to enter grocery stores, schools would be closed for in-school learning, or a large part of the workforce would be operating remotely. It was impossible to predict this dramatic shift in our daily lives and yet consumers, and their behavior, have adjusted and adapted to this new reality.
Just as Covid has impacted individuals, it has also been eye-opening for businesses across all industries. How can brands today adjust and adapt their businesses to anticipate and respond to new and emerging changes in consumer lifestyles and behaviors?
One key observation has been the resilience and growth of brands who have a diverse business portfolio. When you pour all of your resources and operations into a very specific product or service, without considering the possibilities of a shift in consumer behavior, you leave your company vulnerable to the whims of unforeseeable and sometimes inevitable change. Not all diversifications are hugely profitable. Some, in fact, fail. However, this pandemic has proven that brands that touch people’s lives in broader, more meaningful ways, and brands that innovate and iterate on their business to diversify revenue streams, excel. By strategically extending your brand into areas where consumers welcome or demand it, you can strengthen your overall value and help your company withstand any unforeseen pitfalls that could potentially negatively impact your core business.
Look at the diversification of companies like Disney, Amazon and Microsoft as models. Disney’s theme parks, resorts and cruises were closed for a significant portion of the year due to the pandemic, impacting Disney’s business tremendously, but its streaming service Disney+, that was first launched in November 2019, has grown to over 73 million users, helping soften the loss from their other business segments while highlighting a business segment that offers valuable growth and revenue opportunities in the near and long term. While e-commerce makes up a large portion of Amazon’s overall sales, there are many other segments that helped the company flourish during these times (i.e.: devices – Amazon Firestick and Alexa and subscription services – Amazon Prime and Amazon Pharmacy). Each have brought in significant revenue to create huge value for the tech giant.
Microsoft is another example of this, considering it owns a broad range of hardware, cloud services, and platforms. Microsoft Teams workplace-collaboration software has surged during the pandemic and Xbox hardware sales saw an 86% increase in sales. These business segments have not just helped Microsoft survive but actually thrive during this new climate. While there are many reasons to create a diverse business portfolio, a key benefit that comes from diversification is having a buffer against potentially adverse market conditions.
Although there are a multitude of ways to diversify a brand’s business portfolio one way that is cost efficient, effective and mitigates risk is brand extension through licensing. Licensing allows brands to build potential new businesses and test different geographical markets with very low up-front risk. Licensing your brand into natural product extensions offers your brand a faster path to market while requiring less resources to achieve it.
Key factors when looking to diversify your brand:
Take Educated Risks
Looking to try something new invites the possibility of failure, but failure to try something new is far riskier. Brands are living, evolving things and as they grow, so should their missions and innovation strategies. You don’t need huge capital and resources to diversify your business portfolio. Licensing offers a strategic way to enter new markets and categories without the typical overhead costs of manufacturing the products yourself. It’s a tool well worth looking into for your brand growth.
Learn How to Adapt
More so than ever, the business landscape is rapidly changing. Use your customer base as your guide, listen to their challenges and needs, and adapt your business accordingly. Strategic brand extensions can offer your brand a head start on an adaptation strategy. Without investing a huge amount of money, licensing can bring your brand into a new space, test the validity and benefit of the opportunity and chart a course for diving deeper into the category through licensing or possibly even adopting and building out the business further internally.
Colleen Baird, Creative Director, LMCA
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