Market Diversification

by Diane M. Calabrese | Published May 2025

 

A small umbrella shop might diversify by adding raincoats to its inventory. A good idea, unless there is a drought.

The proverbial planning for a rainy day may mean planning for a sunny day, or at least too many sunny days.

Diversification ensures a business can weather downturns. One product may not be selling, but another is.

Adding products or services requires investment. There must be a fair chance of getting a return before investing capital and time.

Balance must be part of any effort to diversify. And rebalancing has to be as routine recording sales.

We put some questions to two members of our industry — each a leader at a diverse company. And they shared some insights into how to think about market diversification.

The respondents are:

Bruno Ferrarese, the co-president of Idrobase Group, which is headquartered in Borgoricco PD, Italy; and Kerry Siggins, the CEO of StoneAge, Inc. in Durango, CO.

 

Cleaner Times (CT) – In the strictest sense, selling more than one model of a machine – or flavor of ice cream – seems to qualify as diversification. How do you define diversification?

 

        Ferrarese — In my view, introducing a new ice cream flavor or a different type of ice cream doesn’t truly qualify as diversification. It’s merely offering the same product in a different style, color, taste, or shape — it remains ice cream at its core. True diversification for an ice cream business would mean expanding into related product categories, such as milkshakes or frozen yogurt, or even venturing into entirely different markets.

In the pressure washer industry, diversification could mean complementing traditional pressure washers with fixed washing and sanitation systems or misting solutions for dust suppression, humidification, and cooling. What ties these together is a common core technology — the high-pressure pump. This allows for operational efficiencies by leveraging the expertise of the same technical staff (engineers, mechanics, technicians, etc.), while also maintaining a partially overlapping customer base.

This approach could be defined as diversification within the company’s core business.

 

          Siggins — At StoneAge, we define diversification as strategically expanding our product offerings, services, and markets to create long-term stability and growth. It’s not just about selling more flavors of the same thing — it’s about intentional expansion that strengthens our core business while opening doors to new opportunities.

True diversification means balancing innovation with operational excellence, ensuring that every new product or market we enter aligns with our vision to be the category leader in computerized industrial cleaning equipment worldwide.

 

 

CT – What’s the risk in diversifying?

 

           Ferrarese — The biggest risk of diversification is failing to achieve the expected success — or worse, making a costly mistake that results in financial and time losses.

However, I firmly believe that taking action is always better than standing still.

When you move your business forward, you may achieve greater or lesser success, but staying stagnant guarantees one thing: you will fall behind. If you keep doing what you already do well, you will only reach the same results you’ve already achieved. Given the speed at which business evolves today, standing still is just another way of moving backward.

 

Siggins — The biggest risk in diversification is losing focus. When a company spreads itself too thin, trying to do too many things at once, it risks diluting its competitive advantage.

If new products or markets aren’t aligned with core capabilities or customer needs, they can become distractions rather than growth drivers. Diversification also requires significant investment — R&D, sales training, customer education, and supply chain adjustments — all of which can strain resources and impact profitability if not executed strategically. At [our company], we are mindful to diversify in ways that strengthen our industry leadership rather than create unnecessary complexity.

 

 

CT – What’s the risk in not diversifying?

 

Ferrarese — Very few products remain “forever young.” Not diversifying increases business risk and raises the probability of a company’s decline.

In reality, diversification should not be limited to products alone — it should also include the markets in which they are sold.

It’s the same logic a farmer applies: never plant just one crop across the entire field because a bad season could wipe out the harvest. Instead, growing multiple types of crops ensures a more stable return.

The same principle applies to industrial business. Failing to diversify is like playing Russian roulette — it may work once, twice, or even three times, but over time, the risk of failure becomes dangerously high.

 

Siggins — The biggest risk in not diversifying is stagnation. Markets evolve, customer needs change, and technology advances — companies that don’t innovate and expand risk becoming obsolete. Over-reliance on a single product line or customer segment makes a business vulnerable to economic downturns, competitive pressures, and industry shifts.

At [our company], we recognize that sustainable growth requires both depth and breadth — deep expertise in our core technology while expanding into adjacent markets and new solutions that create value for our customers. By strategically diversifying, we ensure we remain resilient, competitive, and a driving force in the industrial cleaning industry.

 

 

            CT – Is there one question a business owner should be able to answer when deciding whether to add new products or services or geographic locations to its repertoire?

 

            Ferrarese — [There are several.] What will it cost me if I don’t? What risks am I exposing my company to by staying the same? How much market share will my business lose over the next five years to competitors who choose to diversify?

 

Clarity:

To the list of questions Ferrarese gives us, add one more: Why?

A business owner should know why – not in general, but at the specific point in time, he or she wants to diversify. Any commitment to add products or services or locations should be tied to a firm objective.

For instance, by adding a satellite facility, the customer base will increase by a factor of two. Establish a quantifiable goal.

The goal can only be set after doing significant market research. What may look like an industry trend in buyer preferences could be that and more: an indicator of a market already saturated with the new product or service.

Market research should be based on much more than what’s selling. It should incorporate information from end users. That information may be relayed to a business owner in any number of ways.

Sales representatives should consistently be alert to the wish lists of customers. Service center representatives should be, too. And to the fullest extent possible, a company ought to have a presence at jobsites in the industry it serves. Marketing texts call this kind of information gathering “scouting”. But it’s really just part of being a prudent and successful business owner.

We have all seen enough westerns to know that the owner of the general store often gets queried about products that are not regularly stocked. The owner usually interacts directly with customers so we can expect that many requests for a nail of a new size would be a clue to keep the size in stock.

Making after-sales visits is an excellent way to make sure the customer is satisfied. But it’s an even better way to learn about which complementary products customers are buying. Perhaps adding some of the products makes sense.

It’s no secret that the United States would like U.S.-based companies to export more products. Most countries want to export as much as possible. Although not every company in our industry wants to diversify geographically through exporting, there happens to be a very good market diversification tool (set of tools, really) from the International Trade Commission (Trade.gov) at the U.S. Department of Commerce. It can be used to assess any kind of diversification.

Diversification is always better if it’s done as a matter of choice and not as a matter of necessity. That’s true simply because an owner has more time to do assessments of the market and get it right.

In fact, an owner should always be open to diversification possibilities. If a competitor reveals he or she is looking for a buyer, don’t dismiss the opportunity without thinking about it.

The competitor may serve a different market segment – for example, agriculture instead of residential. Serving customers who work in both areas could provide the sort of diversification buffer that keeps revenue flowing when one sector experiences a downturn.

In the realm of market diversification (like in life), never say never. Perhaps 10 years ago, adding customized equipment or services might not have been a good fit. But in 2025, customization may be just the addition that fits best.

Of, it could be turn-key solutions. What it will always be is something customers want and will pay to have.

Market diversification is fundamentally about identifying and acting on trends. It’s not about chasing unicorns, such as painting pressure washers red, white and blue for the Fourth of July or black and orange for Halloween. However, painting pressure washers in a durable, easy-to-clean color is a different matter.