As we enter the second half of 2021, times are still tough for businesses worldwide. COVID-19 affected almost every industry and vertical on every level, from large corporations to SMBs.
In the UK, 80% of SMBs reported stable or increasing revenue in 2019, but one year later, the same number said revenues are declining, according to a McKinsey report. That same report found that fully 60% of British SMBs expected to have closed permanently by this past April.
For brick-and-mortar businesses and those that depend on the ability to perform services in person, fears of infection and lockdowns made things more complicated, pushing transactions online in droves. From checking their bank balance through digital customer portals to using apps to order takeout, consumers have been forced to adjust to remote service delivery, and there’s no going back.
Although it may have taken a pandemic to shift them online, consumers are enjoying the convenience and speed of digital services too much to give them up again once the crisis passes. A global study from Braze found that 29% of consumers would shop online more after the COVID-19 pandemic, and their top reason was convenience, not health concerns. While the study focused on physical goods, people aren’t likely to feel any differently about service delivery.
Stuck between an increasingly digital client base and a contracting economy, businesses have no choice but to diversify. From the perspective of an agency, diversifying your services, then, strengthens your business proposition, makes you more resilient, and opens up more revenue streams by helping you deliver greater value to your clients.
But successful diversification can be challenging. Here are some points to bear in mind in order to diversify your services and strengthen your market hold as the small business ecosystem recovers in 2021.
Work to Your Strengths
The first step is always to assess your existing skills and capabilities so that you know what you’re already offering and where your strengths lie. Mapping your existing plus points enables you to identify areas where you outstrip your competition and could convert those skills into a new service.
You also need full knowledge of all your assets, so you can look for ways to utilize them differently. Some assets, like data, can be pivoted into an entirely new service without significant capital expenditure.
Diversifying into new service offerings allows you to expand your revenue stream, but focusing on areas where you excel means you can do it more effectively, raise your profile among existing clients, and establish a strong reputation that attracts new customers.
Understand Client Demand
After assessing your own business, the next task is to examine your market. Trends are changing at eyewatering speeds, so you can’t assume that your client base still has the same needs they had a year or even six months ago. Investigating client demand helps reveal new diversification opportunities.
For example, if your clients include lawyers, this sector may see new demand for help drawing up health and safety guidelines, which didn’t exist pre-pandemic. Simply improving customer experience is a strong diversification method that adds to the value you deliver to clients and increases their loyalty, thereby boosting resilience.
A PWC study found that consumers are willing to pay up to 16% more for the same services if they are accompanied by better CX. Meanwhile, 77% of consumers say they’d recommend a business that delivers personalized service, and 42% would pay more for a friendly and welcoming experience.
If these are things you can help clients with, then you’re likely to see increased demand.
Forge Effective Relationships
One of the easiest ways to diversify is by creating reseller partnerships, which enable you to deliver an entirely new set of services to your clients for minimal expenditure.
You could also establish value-add reseller partnerships by adding your own twist, to improve white label tools before selling them on. Your partner has the expertise and you have the connections, so they see increased sales and you get a percentage of the deal.
Reseller partnerships are an easy way to diversify, enabling you to add a new revenue stream and/or expand into a new market without having to hire new staff, buy new equipment, or acquire new skillsets.
Don’t Overstretch Yourself
Stay close to your core competencies as you diversify. The key to successful diversification is to expand, not explode.
For example, marketing agencies could use a platform like vcita’s xperts to offer training and education in using lead nurture automation and other business management tools, on top of your existing do-it-for-you services.
Diversifying this way helps you deliver better CX to increase client acquisition and retention because you’ll be sharing knowledge you already possess, as well as opening up new revenue streams without unbalancing your business stability.
Convert Services into Products
Digital service providers should also explore the possibilities of converting services into products or assets. For example, web designers could sell high quality template websites, or create online courses guiding new solopreneurs to build their own business site. Business consultants could create white papers that explain how to choose the right data visualizations, alongside their existing services that guide SMB clients through their data.
Diversifying in this manner opens up entirely new revenue streams while helping you to pivot online. In this way, service providers who are struggling to transmit their services without in-person interactions can pivot to sell digital products online.
This approach to diversification doesn’t just open up new revenue streams, but can even help some agencies to remain afloat when their usual line of business is cut off.
Smart Diversification Is the Route to Recovery
The new, post-COVID business ecosystem is forcing agencies to diversify in order to increase revenue streams, add new markets, and sometimes to compensate for a business model that’s no longer possible in a digital world.
By assessing your strengths and market demands, creating new relationships and product offerings, and remaining within your existing competencies, service agencies can improve their resilience and profitability for the long term.