If you don’t know what makes you different then how will your customers?
Many entrepreneurs waste their time trying to create a business in an area where there are already established products. They seem to think that just by being better, quicker and/or cheaper they can build a sustainable business. But if the consumers in that sector are already getting acceptable products or services, then the market is destined to become commoditised and consolidated, and generally only large companies will survive. To build sustainable growth, small and medium-size enterprises must find and exploit emerging markets or create products and services that provide better solutions to old problems. But where should you look for niche markets that are capable of creating premium profits?
Professor Clayton Christensen, from the Harvard Business School, and Michael Raynor published a book called The Innovator’s Solution, which examines the problem of sustained growth. They state that 90% of all publicly traded companies are not able to achieve more than a few years of sustained growth. They argue that this is not because of a lack of managerial ability or the avoidance of risk. Growth, they argue, comes from two sources: capturing a share of a growing market where consumers are still seeking better products, and finding new solutions to enduring problems.
Niche markets are usually found where customers’ problems are being poorly dealt with or where products are too complex, too expensive or too large to be used effectively by some potential consumers. Often these niche markets are overlooked by larger companies, which do not take them seriously or consider the niche too small to bother with.
History is littered with examples that demonstrate this theory. Small disk drives opened up the computer games market for products such as PlayStation, transistors caused the portable-radio boom, laptops and mobile phones freed people from the office. Another example is amateur photography. Historically, camera manufacturers competed in clarity, accessories and size. Then along came the digital camera. Early versions were clumsy, had low resolution, a poor viewing window and produced poor-quality photos. But they allowed a tourist to check his photo before leaving the scene, solving a problem that the conventional camera could not. There was also a hassle with sending photos to friends and relatives. It was a time-consuming and costly exercise to have copies made for people who looked at them only once. Now with digital photos and e-mail, you can send out any number of photos to friends, who can have a look and then delete them.
The small business sector has historically been the source of most radical inventions and new business concepts. Many larger companies get locked into their current products and markets, and are blinded by the race to incrementally develop products that their customers are already using.
Large corporations find it hard to offer customised products for certain segments of their market because their manufacturing and distribution systems are best suited to large volumes. The small enterprise can nip away at the periphery with tightly focused, niche-market products, or find new ways of solving a problem and undermine the market share of the larger companies.
Many people think it requires a product or process invention to capture a share of an existing market. In fact, these account for a minor proportion of new start-up companies. Remember, most entrepreneurs create successful companies by finding niche markets that large corporations serve poorly.
Where do you look for such opportunities? Most successful start-ups are within an industry that is already familiar to the entrepreneur, so look around your own industry for problems that need innovative solutions.
- Is there a sector that is using a general-purpose product or service where a more specialised product or service might work better?
- Can you strip out some features or functions and offer a cheaper but equally effective product?
- Are you able to offer a more personalised service or a less personalised service that might appeal to a segment of the market?
- Is there an innovative way of doing business that has worked in another industry that might work in yours?
- What problem is too expensive to solve? Can you develop a less expensive solution?
- Is there a process with many steps that involves excessive customer time and cost? Can you reduce the steps by automating or eliminating part of the process?
Alternatively, can you take a product and use it for a different problem? Baby shampoo opened up the market for daily adult shampoo. Baking soda was used to remove odors from fridges. Look at how people are using products in innovative ways – this may be your next venture.
A lot of what has been talked about throughout this article is your Unique Selling Proposition (USP) or point of difference. What sets you apart from your competitors, and why customers will buy your product/ service over that of your competitors. Your USP can literally be in any one of the many facets of your business including product (quality, portion size, limited availability, secret ingredients, product uses etc), Packaging (easy of use, re-usability, impact, environmental etc), Promotion (Specific Offer, Guarantee, Cross promotions, Exclusive Offers etc), Distribution (Select availability, Internet only, Distribution Alliances etc), Customer Service (Initial Client Contacts, After Sales Service, Follow-up Service, Service Guarantee etc). It is important to remember that your USP does not have to be exclusive to you, you merely need to identify and own it first in your given market. Attached is our 6 step process for helping you to uncover your specific USP and start to leverage it within your business.
5 Steps towards uncovering your USP…
A. Start by asking yourself “What do you believe is unique about your business?”
Consider things like your product/service, price, promotions, distribution, guarantee, originality, décor, theme, exclusivity, age of business, heritage, discount policy, value proposition, service levels …
B. Then Brainstorm both current and future opportunities for uniqueness within your business and the broader market…
C. Then Cross reference your ideas of uniqueness with your current clients/ customers through talking to them.
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- Remember that your clients/ customers are busy too so you want to keep any surveys short and consider a small incentive to say thanks.
- Consider developing a basic ‘tick and flick’ questionnaire or sitting down for a cup of coffee with your customers/ clients (where feasible).
- Questions should be both open and closed and focus on the client/ customer’s independent point of view. The most important question to include would be Why do you come here OR Why do you use our services.
- Remember to encourage open and honest feedback and accept all information as valuable.
D. Finally Cross Reference your ideas of uniqueness with your team members or close business associates/ mentors using the same approach as above.
E. Take all ideas generated and distill them down looking for common and consistent comments. Try to narrow it down to 3 key comments.Whichever of these comments forms the most consistent theme becomes your USP. This can then be developed further and enhanced ready for leveraging into marketing activities.
If you need help with uncovering your USP or point of difference go to https://www.abcbusinesscoaching.com/services/free-coaching/