Finding a Niche for Your Company

A small company should consciously decide on its position within its category of products as a:

  • niche expert or dominator
  • follower or improver of competitors' products
  • innovative leader

Smaller companies are most likely to adopt a niche or follower posture. It is unusual for a small company to be a market leader, unless the product category is so small and specialized that it cannot support more than a few competitors. In deciding how to position the business, small companies should consider their resources, versus those of their competitors, to:

  • innovate
  • afford research and development of new products
  • afford to introduce new products
  • afford to educate buyers about new products
  • afford to compete in marketing program support expenditures

The advantages of being a niche expert. Most small business owners instinctively realize that a small company is particularly vulnerable to larger competitors with similar products. Product development strategies for competing against large companies with significantly greater resources should concentrate on market segments that have the lowest probability of attracting larger competitors:

  • segments too small or specialized to interest larger competitors
  • niche segments that preclude the entry of most larger competitors because of:
    • preemptive technology or expertise of the smaller company
    • local/regional strengths of the smaller company
    • unique distribution strengths of the smaller company
  • premium-priced/quality or low price/commodity product segments outside the mission of larger companies

Example

Hawkins has become known as the highest quality garden tools and accessories company in the home gardening market. Hawkins Tools are marketed directly to consumers via catalogs instead of in retail stores. They are also among the most expensive gardening tools available. Until Hawkins products were introduced, most of the home gardening market had to make do with garden tools sold through hardware stores.

Hawkins took advantage of all three unique opportunities to develop unique product development strategies, preemptive product offerings, high-quality/premium prices, and a unique distribution system to generate two to three times the normal margin of garden tool manufacturers.

Related Resources

Generating New Product Ideas

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