Look Outside the Majority Market
Application
Market surveys indicate a major portion of consumers prefer specific characteristics in a product while a smaller portion favor slightly different characteristics.
A simple graphic illustration shows the relationship of a major market to a minor one.
Of course, the big major market looks very attractive. But, how many suppliers are catering to that group of consumers? How many suppliers target the minor grouping? How can your small enterprise compete with the big suppliers? Is 100% of the minor market larger than 5% of the major? Consider your power in "owning" a market when others later switch to compete on your turf.
This situation can be called the Majority Fallacy when marketers fail to compare the market share.
Big Box retailers and offshore manufacturers restrict many features and ranges of selection because they need the big numbers to attain their economies of scale. Often, they leave a large gap for the small business operator to fill.
Look to these niches for profitable sales.
Stories
Games teach valuable lessons
In the marketing course at an MBA-School student groups competed in many computerized games. One of my colleagues had left his position as a vice-president of a large advertising agency to attend the school. I had access to and was able to understand the programming for most of the games. The two of us would try to get on the same team and we'd recruit members with other complementary skills.
In one intensely contested game the data was arrayed similar to the illustration above. The product was pudding and the two dimensions were consistency and sweetness. The consumers in the minor market wanted their pudding thinner and sweeter. Our competitors and the professor were shocked when our team was far ahead in sales on the first round because we captured over 90% of the minor market which was a larger share than any of the other teams competing in the major market. One team changed its strategy to compete in our market with poorer results.
I have repeated this concept to my students' and our own ventures as a successful method for identifying profitable market niches. There was always the added caution of, ceteris paribus (other things being equal.)
Outcomes
- A sharper focus on selecting a niche market.
- Resist following-the-leader pattern.
- Thinking outside the box.
