With a GDP of nearly $20 trillion and a citizenry accounting for more than a quarter of the global household consumption, the United States is inarguably the most hyper-consumer economy in the history of the world. Hyper-consumerism begets hyper-competition. Hyper-competition is the No.1 problem facing marketers today. Only one business strategy, positioning—the strategy for meaningful differentiation—deals with hyper-competition directly.
How do you find a position that will stand up to the test of time in a brutally competitive world? The answer is to find a hole, then fill it.
In other words — niche it up.
The larger the market, the more the competition, the more specialized a company must become. As Al Ries and Jack Trout put it in their classic book, “Positioning: The Battle for Your Mind, “Cherchez le Creneau”—find the hole and then fill it. The essential characteristic of positioning is niche. But many companies reject the niche. Instead, they try to be all things to all people. They fall into the convergence trap, which is the naive belief that categories are combining. Rather, people want simple. Categories are dividing at an accelerated rate, not converging.
History shows that big marketing victories are achieved by finding unoccupied territory – a niche.
- Computers, for example, split from mainframes into PCs, laptops, notebooks, smartphones and watches.
- Beer is an example of a mainstream category that continues to divide. Today, there are three times more breweries opening than are closing. Beer has divided into domestic, imported, light, ice, red, pale, pilsner, lager, non-alcoholic and now craft beers.
- Currency has divided into Bitcoins, Litecoins, BerkShares, Equal Dollars, Ithaca Hours, Amazon Coins and more.
Every sub-category and sub-sub-category is a niche, and every niche provides an opportunity for marketers to profit from positioning. For example, one of the advantages of narrowing your strategy to focus on a niche market is the ability to dominate with Google search. Google rewards specialization.
The niche paradox — small is the new big.
Niche marketing is beneficial for smaller companies with limited budgets. But every brand, big or small, can benefit from niching. Many niches grow into whole new categories. Take, for example, the four horsemen of tech: Google, Amazon, Apple and Facebook. They all started as niche businesses.
- Facebook began as a social media platform for college students. Now it is the largest social media platform in the world.
- Amazon began by selling books online. Today, it sells practically everything.
- Google started out as a search engine. Today that plays a small role in its diversified business model comprised of many revenue streams, including advertising, Google Cloud, hardware, Android and YouTube.
Remember, just because you start with a specific niche doesn't mean that’s where you’ll end up.
Many holes to find and fill.
Finding a hole is not as difficult as it may seem. There are many possibilities for niching in crowded markets. They include narrowing the focus to a particular product, size, package, audience or market segment, price, distribution, ingredient mix, a cause or concern, even re-inventing the wheel, which can result in creating a whole new category of product or service.
- Dollar General and Dollar Shave Club are examples of companies that exploited the niche of price in their respective categories.
- Advanced Micro Devices (server chips), NVIDIA (graphic chips) and Qualcomm (telecommunications chips) have each sharpened their mental knives to own a specialized segment of the broader chip market.
- In the point-of-sale space, Square’s ultra-mobile card reader targets retailers who don't accept credit cards because they can't get a merchant account. While occupying a small niche within the point-of-sale market space, the total customer market is substantial.
- Lefty's in San Francisco makes a wide range of school, kitchen and home products for left-handed people, which are 10% of the US population. More than 32 million lefties add up to a sizeable total market with a need for the products.
- Untuckit was the first to design and market men’s shirts purposely intended not to be tucked in. Its narrow focus on one design and one audience allowed it to go deep to offer more than 50 fits to suit guys of all sizes.
- Sometimes a niche can be about what’s not in a product. Free Leafy Greens, harvested hydroponically in a Northeast Ohio greenhouse, differentiates its product with hands-free cultivation and no GMOs.
Increasingly, marketers are positioning their brands based on identity and shared values or purpose, what Simon Sinek calls the “Why.” They are the ethos or beliefs of a company.
- LUSH is a good example in the cosmetics' space. Unlike other cosmetic brands, LUSH advocates for the ethical buying and purity of handmade products. It differentiates with eco-friendly packaging, organic ingredients and refusal of animal testing.
- OverDrive found a profitable niche focusing on one customer: America’s free public libraries. Using the company's Libby app, library patrons now have access to hundreds of thousands of digital content, books, audiobooks and videos — with each download producing revenue for the user’s preferred library system.
Now is the time.
No question about it, competition has forced “nichification.” Marketers who find their hole and stick with it, stand to win.
The question for brands trying to position themselves in a market already dominated by another is which niche to adapt. Which holes can they mine?
The risk/reward of launching a distinctive brand needs to be balanced with the expected return on investment. Not all holes are worth mining. When putting all your eggs in one basket, it’s important to make sure you have chosen the right basket.
Odds are in your favor. As long as hyper-competition continues, categories will continue to divide, making this the right time to niche up success.