Disadvantage of a Firm That Decides to Follow a Product Specialization Strategy
Product specialization is a common marketing strategy in which a company focuses on a single product or line in its offering and promotion. While you can build a reputation for expertise with an effective product specialization approach, you also risk negative consequences of putting all your eggs in one basket.
The most significant drawback of specializing in a single product category is that you don't take advantage of diversification benefits. By putting all of your resources and effort into building a business around one product category, you risk financial turmoil if that industry goes sour. Movie rental giant Blockbuster is a prime example of a company that fell apart after its primary product category -- movie rentals -- lost momentum.
One element of product specialization is that you typically promote to multiple target markets. The challenge with this approach is that each type of customer may prefer distinct product attributes and benefits. To succeed in appealing to diverse markets, you often have to invest significant resources in developing and implementing multiple ad campaigns. It is also difficult to succeed in your delivery of multiple marketing campaigns.
When you do succeed in the short term with product specialization, you may risk your opportunities to expand in the future as well. Some companies become so synonymous with particular products or services they can't convince customers to buy new products. Xerox and Kleenex are classic examples of brands that succeeded with product specialization. However, each also struggled to shift into new product categories after facing increased competition in their primary product markets.
Despite these disadvantages, many small businesses opt for a product specialization strategy because they don't want to compete head on with larger discount or department stores. In a local market, product specialization combined with personalized service can attract interest and loyalty from community leaders and customers. Discerning customers often opt for higher-quality, higher-cost products when making purchases in important product categories. A small, custom-made jewelry business can potentially build a loyal customer base with a local market.