This is an article from Mr. Andreas von der Heydt and I got his friendly permission to publish this here on trust7. 

The Best Niche Strategies To Compete With The Goliaths

Yes, still nowadays niche companies, SMEs, and underdogs can successfully compete with the big corporations in this world. The David versus Goliath legend is alive!

At the same time, however, the Goliaths of today´s fierce and highly dynamic business world (think Google, Wal-Mart, Apple, Coca-Cola, Procter & Gamble, etc.) have become much more innovative, agile, and aware of the need to enter attractive niches.

This article provides proven strategies and concrete action steps for smaller market players. And, believe it or not, you´ll learn what a halitophobic is and how one niche company has built its amazing success story on the concept of halitophobia!

So, embark on our journey of learning and discovering new and stimulating insights!

MASS BUSINESS VERSUS NICHE BUSINESS APPROACH

While a mass business is about selling to everyone, niche companies focus on a specific segment of consumers (defined e.g. by gender, age, ethnic background, occupation, hobbies, etc.). Musicians, pet owners, wine lovers or teenagers are examples of broadly-defined niches. Once you´ll have defined a niche, you are likely to find many other niches within it (e.g. people who die for Spanish Rioja red wines, small dog owners, piano players).

You can tailor everything from product features, distribution channels to advertising to that specific market by emphasizing the features and the benefits that appeal to that particular segment. If done well, a niche business requires less money. It also provides the benefit of flying under the radar of your competitors (might be helpful while you establish your niche). Starting in the niche doesn’t necessarily mean you have to stay there.

The Internet has made the niche business model easier than ever before. However, the strategy of selling smaller quantities of a wider range of goods and earn higher margins (the so-called long-term phenomenon as described by Malcolm Gladwell in his widely acclaimed book The Tipping Point) will not help smaller companies to escape the fierce mass market competition. Unless if they have found their unique market sweet spots, i.e. offering products and services to target consumers who are willing to pay above-average prices.

THE SUCCESSFUL NICHE MARKET STRATEGY

Based on my experience there are 12 business principles which allow any organization to pursue a successfull niche market strategy.

Customer Analysis And Target Marketing

After having analyzed possible target markets and segments make sure that your products and/or services are truly different from existing options and that they meet target consumers´ wants and needs in a (much) better way. Try to find out e.g. if possible offerings are currently missing, if consumers complain about existing offers, or if you have the know-how and skills to combine various sub-offers into a combined, holistic one.

Innovation

Clearly niche businesses are not immune to competition, especially from larger market players with huge resources and bigger economies of scale. As such successful niche businesses will respond with innovation and higher-quality products, rather than cost-cutting exercises.

Proto Labs which is s a leading online and technology-enabled quick-turn manufacturer of custom parts for prototyping and short-run production. They market their high-quality products to product developers worldwide, who are under increasing pressure to bring their finished products to market faster than ever before. They utilize computer numerical control, or CNC, machining, injection molding, and 3D printing to manufacture custom parts for their customers. You can very easily get a quote on their homepage.

Quality Obsession

The Morgan Motor Company is the last remaining family owned and independent British car manufacturer. Morgan cars are famous for their unique blend of charisma, quality materials, craftsmanship and performance. All Morgan cars are coach built. Prospective owners are encouraged to visit the factory to watch their cars being built, and to choose from a wide range of paint and leather colours as well as optional extras that will stamp their mark on the car and make it their own. Today, the factory produces with 177 employees approximately 1,300 cars per year.

First Class Customer Service

Brands are built through every single experience customers have with them. Especially for niche brands it is crucial to deliver top-notch customer service.

Ever heard of the world´s friendliest restaurant Tim’s Place in Albuquerque, New Mexico? They do not only serve great food, but also personal hugs to any patron who desires being hugged (the hug counter on their homepage shows currently 42,730 hugs given). Tim and his team strongly believe that people have a huge appetite for being genuinely welcomed, connected with, touched, appreciated, and honestly cared for. Who wouldn´t agree?

Cost Control

Financial funds are needed to come up with innovations. As a consequence cost management is very important. Most notably your R&D, production, distribution, marketing, and HR costs should be kept under control.

In regards of R&D and production costs there are multiple ways to maintain economies of scale even when producing a relatively wide number of narrowly targeted products. Like in the automobile industry you could establish a generic product platform. Most golf companies offer their clubs and drivers with hundreds of different combinations (multiple shafts, heads, and angles). They have standardized the interconnections whilst being able to configurate the various components based on the players´ needs. Bringing distribution costs down is also key. Therefore think about options such as e-commerce, shared offline distribution (e.g. by using agents and other third party providers), producing only based on order, flexible inventory allocation, etc.

An additional option is to implement an Enterprise Resource Planning (ERP) system. This helps to create a solid infrastructure while maintaining continuous operations. Exact Globe Next and NetSuite are two sample vendors specifically designed for small and niche businesses.

Outsourcing And Crowdsourcing

Time and internal resources might be scarce when running a niche and/or a small business. Consequently you might want to outsource non-value adding tasks such as bookkeeping, payroll, IT, and administrative support. Potentially also SEO, social marketing, design, PR, and communications. The best freelance marketplaces and outsourcing portals are oDesk (my favourite!), Freelancer, and elance. Crowdfunding, or collaborative funding via the web, is an excellent option especiall for SMEs to get access to fresh capital and investors. The leading sites are Crowdfunder (for any business), Indiegogo (broad focus, high flexibility), and Kickstarter (especially for creative projects).

Agility And Calculated Risk Taking

Niche players must be agile enough to take advantage of gaps in the market and to adapt. That said, being agile doesn’t have to mean being inconsistent. Businesses that are not flexible enough run the risk of becoming outwitted by quicker-moving competitors.

For example in Germany successful mid-sized and small companies, often being pure niche players, are grouped into the “German Mittelstand.” Leading “German Mittelstand” companies – often also referred to as Hidden Champions - are considered as the most innovative SMEs globally, and are two to three times more profitable than large enterprises. One highly innovative and agile company is Enercon. They have more than 30% of all patents worldwide in wind power generation. And they have exceptional ideas, such as the “E-ship” which uses so called Flettner-rotors to harness the power of the wind.

Networking And Collaboration

Building strong networks beyond the niche company´s boundaries should be part of its DNA. Regular exchanges with other companies, universities, research centers, etc. in order to share certain cost-intensive projects, to learn from each other, and to assist each other. The Meiko Network Japan, a company dedicated to provide best learning and teaching offers to various targeted customer segments, works closely with specific universities, organizations, franchisees, etc. to leverage know-how and resources.

Personal Branding And Digital Marketing

Traditional marketing campaigns are not suitable for most niche markets; besides they're too expensive and often not precise enough. Instead use word-of-mouth marketing (e.g. via niche spokespersons and opinion leaders), consumer-generated content (generated e.g. via a consumer forum, moderation of a LinkedIn group, etc.), social, and digital marketing.

Also Be Personal: When in 1989 Annie Withey co-founded Annie’s Homegrown, Inc. she put her own address and phone number on each box to encourage customers to connect with her. She wanted to show by example that a successful business could also be socially responsible.

Inspirational examples of excellent digital niche market campaigns are Orabrush (now learn about halitophobia!) and Method which has done an excellent job of taking on global megabrand rivals like Johnson and Johnson with a comparatively tiny budget. A fun blog helps, but the real winners are an interesting newsletter and an entertaining YouTube channel as part of the “People Against Dirty” campaign.

Employee Engagement

Everyone gets a slice of the cake at independent London-based The 7Stars media agency. All departments get together for a weekly Wednesday morning meeting, and staff members take turns in the “company bake-off” to produce a homemade treat afterwards.

Bureaucracy is banned. Nobody has to fill in a holiday form and days off are never counted. The holiday policy is to take as much time off as every employee needs. There’s a tenner for the employee whose brainwave is voted idea of the week; the bake-off was one winner, and others have included two annual “donation days” to work for a good cause. Everyone has a personal training plan and financial support for work-related qualifications. Employees keep in good health with free gym membership, monthly visits from a masseuse, and breakfast and fresh fruit provided every day.

Focus And Consistency

That´s certainly something smaller companies can and must learn from leading big companies. The biggies are crystal clear about what they are (and what they aren´t) and what they want to achieve. They are rigid and consistent. Usually they think about the long-run and show backbone when facing resistance on their way to achieve their set targets. They would not give-in easily. Instead they would try harder.

Leadership

Managing and leading niche companies is a true entrepreneurial challenge. No doubt! Nowhere else leaders need to encompass two main, and opposed characteristics: Thinking Big and Being Obsessed with Details. Thinking Big means they need to create and communicate a bold direction that inspires results. They think differently, look around corners for new and alternative ways, and they love serving customers. At the same time they are able of operating on all levels. They enjoy deep diving into small details and audit frequently. No task is beneath them.

Now, it´s Your turn: What do you think? Which niche and small business strategies and tactics do you know? Any other thoughts?

Let us know in the comments here!

Best regards,

Andreas von der Heydt

*****

Andreas von der Heydt is the Country Manager of Amazon BuyVIP in Germany. Before that he hold senior management positions at L'Oréal. He´s a leadership expert, executive coach and NLP master. He also founded Consumer Goods Club. Andreas worked and lived in Europe, the U.S. and Asia.

Here is the source of the original article:

https://www.linkedin.com/today/post/article/20140216134730-175081329-the-best-niche-strategies-to-compete-with-the-goliaths