Everybody knows there is a market… and you also need to know how to connect with that market. To do that you need some more details. Let’s take a quick look at that.
We’ll assume that you are making regular sales because you have done your market research (And if you haven’t then read the earlier post in this series). So now you will benefit by knowing the health of the overall market, in the area you trade in. If it is growing then you can look forward – all else being equal – to continued growth. If instead the overall market is contracting then you need to adjust for that – achieve a bigger market share or diversify for example.
You can even compare your company growth to the overall market growth. Why? Your sales volume might be growing, but if it is growing at a smaller rate than the overall market then your market share is decreasing – and that’s not a good thing! If nothing changes a decreasing market share eventually becomes zero market share.
You also need to be aware of the overall market so that you can expand your offers – what I mean is: each market is made up of a number of segments. Examples of this are: work clothes, dress clothes, casual and sporting clothes, or different types of cars: sporty, family, utility, people mover and so on.
Most if not all markets have “sub-markets”, and the point is that trading in a single market segment at the beginning is easier than trying to cover all the bases right from Day 1. hat just means there is a benefit to you if you select a very narrow range to start out. Once you establish yourself in your chosen niche you can expand. Perhaps adding casual clothing to your work wear range, then later adding sports gear and so on.
Each additional range leverages your earlier success.
Selecting the most appropriate sub market to start your trading success story just means identifying which of those is likely to be the most profitable for you. Some factors you might consider are the relative size of the sub markets (By sales volume, by population, by number of transactions or any other metric that makes sense to you), which one allows you to present the most favourable case to your target market, which one has the lowest entry cost and so on. What other factors can you think of?
Another factor to consider is your competition. How entrenched are they? have they grown complacent or are they still an agile business? How likely are they to take aggressive action against a new competitor (you) and what is their capability to do that? If they have a history of super-competitiveness and a large war chest ready to launch an army of lawyers your way then maybe you could look for a different target market! At least until you can compete on relatively equal terms.
By the way – competing on equal terms doesn’t mean just waiting until you have a war chest of funds too. It may be that the existing competitor is aggressive, and that they have a substantial war chest, but also maybe they are complacent, or not delivering to the standard that their clients have grown to accept. I recall an advert from Subaru a few years ago were their advert simply apologised to Porsche. It then went on to explain that their car (WRX) had gone round corners on a race track quicker than the Porsche, then they described the price difference, the difference in the cachet of the two brands and so on. They agreed that this little upstart really shouldn’t have been able to outperform the other in this way – but it had. And, well, they were a little proud of that.
You too might be able to use the market penetration and power of your competitor to increase your visibility. All you need is to be able to demonstrate that in some material way you are better than they are.
Another factor to consider when selecting a target niche is environmental issues. Maybe you have discovered a better way to test cosmetics or cigarettes, a better way to catch fish that is both sustainable and doesn’t harm any “by catch”, raising farm produce in a way that reduces or even removes the current negative effects on the environment, a way to reduce the transport carbon footprint when transporting items to market, or a better way to harvest the plastic in the oceans. Can you out-compete the existing competition, and hold on to that advantage over time? A niche where they can adjust and remove you advantage after a month or two is not a good target, especially if they can then out-promote you.
The point is that you need to be aware of all of the factors that influence your choice, and have accurately identified the relevance (or weighting) of each. Being aware of the market means never being surprised.
And when you are in business you probably don’t want to be surprised.