You Don't Need To Sell More Line Items

You Don't Need More Line Items

Why is the moment that a company wants to drive more revenue, the first thought is, what else can we sell that compliments what people already know us for, and package it all under the same brand because everyone knows our brand means quality.

Was This Article Helpful

Stop Selling More Line Items And Focus Instead

I've worked for numerous companies that either had a large portfolio of solutions or thought they needed to acquire every company that did something similar, both, leading to the market having no idea what you offer.

There are several problems with this mindset, but I think the two most alarming ones are:

• You're going to put a lot more work on your already busy team
• You're going to dilute your position in the market

And, I am sure you're already getting defensive but hear me out. In the next couple of paragraphs, look through the examples of how to do it better and ask yourself, which platform do I want to design?

Burning Out Your Team

The phrase, "It's easier said than done" is the immediate phrase I think of whenever I hear that a new product is going to be added to the platform.

Unless you have your marketing and sales process frictionless (very unlikely), the only thing you're going to do when you add a new solution to your platform is stress out your team.

Yeah, it might make sense, and you'll see the potential revenue, but are you also willing to expand your marketing and sales team to promote and sell this new solution, or are you expecting your existing team to just start managing multiple solutions?

When you want to do great marketing and become the 800-pound gorilla in the zoo, it's going to be difficult, to do that with a broad range of solutions that don't cut through the noise of the market and is the platform that someone automatically thinks of when searching for solutions for the XYZ problem.

Putting This Into Practice

If you don't think this is real, here is a list of market problems that I want you to think about the first few companies that come to mind:

• I need to find something online
• I need a phone
• I want an expense fast car
• I want a soda
• I need a way to manage all my business contacts online
• What chatbot is the best

When you ask these questions to your teams, you're probably going to hear similar answers, and this is what you want for your platform too. The key here is to find the category, industry, or term you want people to think of you your platform.

Now, do you also see why the moment you add other solutions, people start to forget who you are or question what you sell anymore because they only see you as one thing?

Diluting Your Market Position

Another phrase that comes to mind is, "When you try to be everything to everyone, you become nothing." People can only process so much information so the moment you try to expand your solution capabilities, you start to dilute the position you have in the market's mind of what you're good at.

The 80/20 Rule, Pareto Principle

Photo Credit: Intuit Mint

And of course when you think of large companies like IBM, Intel, Microsoft, Amazon, or any other large company, you're probably saying, "Well these guys have a large list of solutions," but the reality is when you start to dig into their financials, you'll start to realize that most of their revenue comes from only a handful of solutions such as:

• IBM used to make most of its money on hardware, their mainframe used to be the staple, now infrastructure only makes up 25%, and software is 60%. Would it be better to focus on software instead of consulting, infrastructure, and finance? Furthermore, did you even know IBM was a software company? Doesn't their name stand for Internation Business Machines?
• Intel has six different operating units under its main business structure. CCG and DCG accounted for 84% of Intel's total sales last year.
• Microsoft divides its business into three reportable segments, breaking out results by both revenue and operating income: productivity and business processes, intelligent cloud, and more personal computing. They have an even split with sales.
• Amazon divides its business into three segments: North America, International, and AWS (Amazon Web Services). 60% of the company's net sales for the quarter comes from retail sales in North America alone.

These are only a few examples, but the rule is the same, they offer many solutions but the majority of their revenue comes from a handful of solutions.

Would It Not Be Better To Focus

So the next question is then would they not be able to make more revenue if they reduced their overhead and only focused on what was making money?

If you think about it, this is exactly what Steve Jobs did when he returned to Apple in 1997. Apple was on the verge of bankruptcy because they were chasing other hardware companies like Intel and IBM. When Jobs returned, he said we aren't making %$&# anymore, we're going to make Apple cool again. He then went on to cut all the product lines that weren't driving revenue, fired agencies, and focused on just a few product lines.

In 1997, Apple was evaluated at $7B, fast forward to today, they're still true to only a handful of products, and last year posted a net income of $99.8 billion on revenue of $394.3 billion where the iPhone alone comprised of 52.1% of the total revenue.

The real question to ask is, why in the world is Apple, historically a hardware company, moving into the search world and looking to compete with Google and ChatGPT? Now that is confusing and makes no sense, at least to me personally, I would never think of Apple as a search engine.

Other Companies Diluting Their Brand Names

You see a lot of tech companies trying to extend their reach and moving into other industries such as Alphabet, Amazon, and Apple have all been investing in autonomous vehicles, and many have launched business units dedicated to developing this technology.

Do you find it difficult to understand then how Google is under attack now by ChatGPT? When you start getting relaxed about what made you successful and try to expand into other industries, it's only a matter of time before someone starts to find chinks in your armor and attacks.

Another weird move is Amazon making moves into health care. Would you personally trust an ecommerce retailer to assist you with your health? Will this move dilute its position in retail in the long term as people start to confuse the identity of Amazon as a company and possibly another digital retailer will move in on its position in the market?

The Long-Term Effect

More importantly than putting more work on your team, what you'll also notice in the long-term when organizations expand their product lines, is they often will see short-term gains but when you fast forward 3-5 years down the road, you'll start to see a decline in their revenues, even the product/service they were originally known for will decline.

A Real World Example

Going back to Microsoft, once known for being a software company making Microsoft 365 & Office for personal computers, today, they have developed Outlook, Edge, Teams, Skype, Surface, and many others.

They're even into gaming with the Xbox and social media purchasing LinkedIn. When you talk to their leadership, their philosophy is they want to own a majority share in anything to do with software. Bold ambitions and sounds good to an investor, but unlikely to happen.

The problem again, is when trying to extend the Microsoft brand to be all these things, and you start competing with companies that only do one of these things, you're going to lose every time.

It's for this reason that Outlook usually loses to Gmail, Edge loses to Chrome, Teams loses to Zoom, Skype loses to Slack, and the Surface loses to Apple and Lenovo.

As the Microsoft brand name starts to dilute, I honestly wouldn't be surprised if a new operating system comes in and replaces Microsoft. As of writing this article, they are down nearly $100 per share from their high in November of 2021.

So What Should You Do

When it comes to driving more revenue, remember this one phrase, convenience is sold at a premium.

Think of all the times you were willing to spend more money because the product or service you bought promised that you could:

• You'll achieve the result you're looking for or you're money back
• You'll achieve the result you're looking for 10-100X faster than the competitors solution
• You'll achieve the result you're looking for with the push of a button

When it comes to targeting the mainstream market, this is where most business owners get lazy and want to chase the easy money and expand their product lines.

When you want to drive high lifetime value for your platform that you can charge a premium for, you and your development team need to build a platform that works without fail, is 100x faster, and is incredibly easy for even the non-tech person to use. This is what made Microsoft, Microsoft at genesis, you didn't need to know technology to use the interface.

Instead of offering more and more, become the platform known for achieving results without fail and making it super easy to fast to do so.

Other Real World Examples

In recent times, the best example I can think of that has done this well, and for that reason, you hear about them all over the internet, is OpenAI and ChatGPT.

This platform allows you to search the internet and find answers as well as create content marketing in a matter of seconds. Talk about getting results fast and easy, as Staples would say, "That was easy."

An even better example is the weight loss industry. There are thousands of solutions all stating they can help you lose weight. To put things in perspective, what would you rather sell, a $20 membership to Planet Fitness or a $3,600 liposuction surgery?

As the consumer, the question is do I want to spend less and have to go into the gym each and every day, sweating, and grinding to lose weight, or simply pay $3,600, show up at an office and walk out hours later with the weight gone?

As I said, convenience is sold at a premium.

Before You Started Expanding Your Position

So the next time you're asked to drive more revenue by the board or your investors, I would suggest thinking about how you can make your platform 100x better or how to reduce the costs of acquiring your customers before thinking about adding line extensions.

Not only will this make your team happy because they'll able to stay focused on developing, marketing, and selling a smaller portfolio and will be able to make the messaging and sales conversations amazing but you'll also be able to stand out in the market as the best at what you do, keep your overhead low, and drive higher revenue due to large margins and lifetime value.

Was This Article Helpful

Share it with your colleagues or network.