We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Concentric Diversification?

Malcolm Tatum
By
Updated: May 16, 2024
Views: 35,076
Share

Concentric diversification is one of several different diversification strategies used by companies to increase their appeal to consumers. With this particular approach, the business will attempt to increase market share by introducing a range of new products that are likely to not only attract the attention of existing clients but also draw in new customers. Sometimes referred to as convergent diversification, the goal is to motivate current customers to keep purchasing the company’s older products while also choosing to purchase the newer products. At the same time, the effort also brings in new clients who have no relationship with the older products, based on the appeal of the recently launched product line.

With concentric diversification, it is not unusual for newer products to have some relationship to the existing product line. For example, a company that has established a steady clientele for its paper plates may choose to add other product lines that can be used along with the plates. This may include a line of color-coordinated disposable drinking cups, napkins, and even plastic cutlery and disposable tablecloths. The idea is to entice customers who already buy the plates to purchase the other goods to use at the same time. This approach may also appeal to new customers who want to create a coordinated look when enjoying a casual dining experience, such as an outdoor picnic.

In some instances, concentric diversification will involve opening new markets by creating a variation on a product line that has already established a loyal clientele in a particular market sector. Using this approach, a company that currently offers commercial cleaning products used by professional cleaning services may choose to launch a similar line of products that appeals to households. In some cases, the branding for the new line may be reminiscent of the older commercial line, making it possible for people who already known and trust the older products to try the newer line at home. Assuming the new line provides an acceptable level of satisfaction, the manufacturer will expand its client base into a new market sector, effectively increasing its profit margin and making a success of the concentric diversification effort.

The general principal of concentric diversification can also translate easily into other settings. When it comes to investment portfolio diversification, an investor may choose to include a series or group of stocks issued by companies that operate in similar markets, such as buying stock in a telephone company and also in a conference call bureau. The approach allows the investor to enjoy similar returns from both investments since there are some consumers who would make use of both types of telecommunication services.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By Glasis — On Feb 13, 2014

Good point, Certlerant.

A good marketing strategy for product diversification is continuing to focus promotional efforts on the product that made the company famous, so to speak.

Once customers are drawn in by quality products they've come to know and love, they are more likely to take a chance on buying new offerings.

By Certlerant — On Feb 12, 2014

The key in a concentric diversification strategy is to avoid being too diverse with your product offerings.

No matter how good a company's reputation is in its core market, customers are likely to get nervous if that company begins to branch out in a whole new direction.

They will begin to wonder if there is a problem with the familiar products and, ultimately, if products they depend on are going to be phased out in favor of something new.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.smartcapitalmind.com/what-is-concentric-diversification.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.