Branch out, meet customer needs, grow profits. Simple, right?

We’ve all been there when a retailer or a brand appears to do something left field. Eye brows raise, we all chip in with our initial opinions with our desk buddies. Others see the potential.

Throughout history some brands have got this right. General Electric started out selling lamps then diversified to electricity. Disney didn’t always do theme parks. 3M didn’t start off selling ‘post its’ that just happened by accident whilst developing a super strong adhesive.

The most famous success story of diversification in recent history is Apple. From revolutionising computers (iMac) to music (iPod) to powerful smart phones (iPhone) they made waves and changed not only how people shop but what they want. As only a close second to Samsung, Apple iPhone sales worldwide have consistently increased from 170 million units in 2014 to almost 216 million units 2017.

When it comes to mobile phone contracts, shoppers nowadays are keeping their handsets for longer whilst SIM only contracts are becoming more popular. The giants of the mobile network world are struggling. New handsets no longer offer a seismic shift in technology but merely marginal gains with a large price tag. Shoppers simply don’t see the benefit of trading up every 18 to 24 months like they once did.

What’s new this week?

Superdrug are diversifying into the world of mobile networks, in partnership with Three. They are offering this exclusively to health and beauty card holders.

Right on brand, with the sassy tone of voice, I like many others received the email invite. At first, I the voice inside my head was saying ‘what is this?!’ but quickly I wanted to know more. My interest was piqued, I wanted to understand why Superdrug would go into unchartered territory?

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Why are Superdrug diversifying?

We know that Superdrug are repositioning the brand to retain appeal to younger audiences. Sponsoring Love Island, stocking brands such as Hollister and their dialled up, fun and flirty tone of voice are just a few of their recent strategic moves.

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The Ansoff Matrix can help us to understand why Superdrug are diversifying into new products in the UK. It’s a product development strategy to drive growth.

In the current context of the struggling UK high street and the rise of Pure Plays in beauty, Superdrug know that securing sales from younger shoppers is key to growth.  Adding new revenue streams could be relatively easier than trying to more of the same i.e. growing market share in the UK beauty market.

Yes, it is risky. It may not work. Will it stave off the rise of the Pure Plays?

The exclusive link with the Health and Beauty loyalty scheme could be the key hook. You must be a member to get your sim only deal. A clear incentive to shop with Superdrug if you are a mobile customer. It’s currently a unique proposition and appears to be aimed at younger shoppers who want no fuss, data heavy mobile networks.

But, will the army of Love Island followers flock to Superdrug and snap up their offer? We’ll have to watch this space.

Sources:

iPhone stats  

Ansoff Matrix

By Becki Jarvis, Research Director

Katie Grundy