Market Niche Design

Those who decide to develop and create a market niche take step out of the competitive race of the competitors. Doing this, they take another step forward, at least as big as the step an individual takes from employment to entrepreneurship.

The independent entrepreneurial path of an individual, a group or even an entire collective enables independent decision-making, time management and slightly better earnings. For some, that's not enough. They decide to develop and create a new market niche. In doing so, they break free from the shackles of competitive running, similar to those who have broken free from the shackles of employment relationships.

The niches we develop include new products, services or market approaches that did not exist before or upgrades of existing competitive products and services to the level of technological, quality, or even status prestige. A sufficiently unique, more useful business model for customers might be enough too.

We don't listen to customers, we get to know them and educate them

Mastering a niche market means moving from listening to customers to educating them. In a leading position in a niche, we are not concerned with how we will catch up with the competition, but rather with how we will lead customers in the right direction one step ahead of our competitive followers. Realizing?this, we have the possibility of several times higher added value.

Where do we find a niche?

Despite the fact that identifying existing niches is very simple, new market niches are not on any list on the Internet or in any book, because they do not exist yet. Companies that find and develop their market niche start from the other side - from expertise, customer perception and regardless of competition. In principle, this could be done by any company that survives within the competitive struggle, but few even think that such a step would be possible. Most of them live in the belief that some specifics of the market situation, available funds or similar reasons do not allow them to do so. I usually take this as ignorance or an excuse, since quite a few companies have made such a breakthrough in their not-so-good times.

Combinations of expertises and multidisciplinarity are important. This aspect is easiest to understand if we start from an average company. In the usual competition race, competitive success depends on two components: a competitive product or service, and its sales. Success is determined by the weaker of the two components. For companies that decide to take the second breakthrough step, that means to their own niche, there are also usually crucial two sensibly chosen components and their combinatorics. In addition to the product or service itself, those components can be from the domains of analytics, design, ESG, community building, to elements of social and other humanities, even to art. Exceptionally, there are some cases known, that managed to enter the sphere of niche designers with only one component. But the combination ensures a significantly longer lifespan of the niche leadership than just a single technical advantage, which is faster to catch than the combination.

An economy of value rather than scale

Not only the world's most prominent unicorns, which have reached almost monopoly status, but also hundreds or thousands of smaller companies are developers and designers of market niches. They grow to different sizes. Constant growth is not a condition for existence, the goal is a proportional increase in added value. The management of these companies is more interested in running a niche than running a growing corporation. Niche leadership ensures growth of added value on the revenue side, in which they are focused as trendsetters. They are less interested in the cost side. While the usual competitors are quite intensively engaged in cost optimization, the leaders in the niches devote large part of the cost to the freedom of deep breathing of creativity, which multiplies the revenue. After a certain time, customers also start to coming on their own, consequently the focus of the sales department shifts to effective non-standard presentation.

To make it easier to understand, let's imagine Swiss watch manufacturers. By entering the level of luxury and maintaining this position, they do not need to deal with competition for several decades. They maintain their status and thereby take care of the status of their customers. This is one of the extremes, but the story can be applied to anything, including e.g. for industrial equipment.

B2C or B2B?

Niche developers and designers are emerging within providers to the end customer (B2C) and within industrial supply chains (B2B). In the case of end customers it is more about products and services of prestige, luxury and only then exceptional quality, while in case of industrial supply chains it is primarily about technological and quality advantages, development collaborations and after that capacities, locations and similar technical characteristics.

Followers are welcome. There is no leader without followers. A leadership position in a niche requires a high selling price which is affordable to a minority of buyers. Cheaper trackers can cover the larger mass of these buyers. A larger mass of buyers brings double benefit: the niche becomes interesting to a wider circle of the market and buyers, admirers of the niche who started lower, are approaching the top on their development path.

Who has a chance?

Every company has the possibility of transitioning into niche leadership. The difference is just that some are constantly engaged in competition, while others are constantly looking for the points where no one has touched yet. I compare this to looking backward and forward. I prefer companies which expect my help in finding a path that no one has taken before and they call it solving a problem. Companies, however, where they only have to solve this and that problem in hindsight and say that we will move on later, never come to that moment nor to a clear view to the future. A lot of enthusiasm, encouragement and argumentation is needed, but it doesn't always make sense. If I return to the analogy of an individual entering entrepreneurship - the transition from an employment relationship to entrepreneurship - it is possible for everyone, but I would not encourage everyone.

Where can we find the recipe?

There are no books and no recipes on how to find a niche and how to run a specific niche, because the main characteristic is uniqueness. Different methodologies, articles and also AI suggest only logical steps. The closest methodologies come from the world of startups. However, there are examples of good practice that are essential to know, even though they are never directly applicable.

In my practice, I have come across some different thoughts about niche initialization, different reasons for making decisions about developing own niche and, of course, ways of doing it. We did not think about what we know, but what essence we could offer to the customer in addition to the basic product in aim to engage the customer. At the same time it should be so complex that the competition would not be able to follow. Such thinking resulted in own niche. After all, I have a case of the transition from the sphere of high quality through the sphere of prestige up to the luxury level. There are also multiple cases of combinations of high mathematical combinatorics with a very simple product, and so on.

What is the common denominator of the successful?

The common denominator is therefore neither a starting point, nor a method of thinking, nor a step-by-step recipe. Nor is the condition of the company so it could afford the time and/or money for freedom of thought. The common denominator is a simple and constant orientation forward into the unknown part of the future (a look into the known part of the future does not count, you can read and learn about it in schools and articles), combined with an overview of the profession together with the target group of customers. Further common denominator is the breadth of the business model and not the product, and the use of external "brains" - experienced heads of various disciplines or real consultants who provide a mandatory view from another angle. The common denominator is as well as the decision to take a step out of the comfort zone, leaving the competitive running and stepping forward into leading rather than listening to the customer.

Being out of the usual competitive run

The development and formation of a niche, once we have one, is quite different from the maintenance of an usual competitive position. We are not looking at what we would change in the product or service to be more competitive, but how we would change the customer. We are looking to what we would change to move the entire niche in the right direction. In marketing, we also do not highlight the advantages over our competitors, because niche customers know our specialty, so they are already here. In any case. The relationship with the market is more like nurturing a community than a narrative about oneself. "Customer orientation" no longer means submission to the customer, but rather his education. Like a good teacher, we focus on the student and no longer on constantly bragging about our excellent qualities.

Beyond Innovation

Being innovative on the product is mandatory, but not enough. Innovation on the essence brought to the customer counts.

Highest price, almost zero sales activities but unique marketing activities

are proof that we designed a niche.