Finding a Niche
A market in its entirety is too broad in scope for any but the largest companies
to tackle successfully. The best strategy for a smaller business is to divide
demand into manageable market niches. Small operations can then offer specialized
goods and services attractive to a specific group of prospective buyers.
There are undoubtedly some particular products or services you are especially
suited to provide. Study the market carefully and you will find opportunities.
As an example, surgical instruments used to be sold in bulk to both small medical
practices and large hospitals. One firm realized that the smaller practices
could not afford to sterilize instruments after each use like hospitals did,
but instead simply disposed of them. The firm's sales representatives talked
to surgeons and hospital workers to learn what would be more suitable for them.
Based on this information, the company developed disposable instruments which
could be sold in larger quantities at a lower cost. Another firm capitalized
on the fact that hospital operating rooms must carefully count the instruments
used before and after surgery. This firm met that particular need by packaging
their instruments in pre-counted, customized sets for different forms of surgery.
While researching your own company's niche, consider the results of your market
survey and the areas in which your competitors are already firmly situated.
Put this information into a table or a graph to illustrate where an opening
might exist for your product or service. Try to find the right configuration
of products, services, quality, and price that will ensure the least direct
competition. Unfortunately, there is no universally effective way to make these
comparisons. Not only will the desired attributes vary from industry to industry,
but there is also an imaginative element that cannot be formalized. For example,
only someone who had already thought of developing pre-packaged surgical instruments
could use a survey to determine whether or not a market actually existed for
them.
A well-designed database can help you sort through your market information
and reveal particular segments you might not see otherwise. For example, do
customers in a certain geographic area tend to purchase products that combine
high quality and high price more frequently? Do your small business clients
take advantage of your customer service more often than larger ones? If so,
consider focusing on being a local provider of high quality goods and services,
or a service-oriented company that pays extra attention to small businesses.
If you do target a new niche market, make sure that this niche does not conflict
with your overall business plan. For example, a small bakery that makes cookies
by hand cannot go after a market for inexpensive, mass-produced cookies, regardless
of the demand.
Source: U.S. Small Business Administration
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