Creating a star business – what’s a market niche?

Google, Apple, Intel, Microsost, Ford in the early days, US Steel

A star business is one which will most assuredly succeed beyond expectation and which meets the following 2 criteria:

1) Is the leader in your market niche based on your share of the revenue in that market niche; and

2) Is your market niche growing by at least 10% per annum

Or to combine these into one test – you need to be the leader in a niche market that is growing by 10%pa minimum

Assuming you are like most small businesses and say ‘no’ to at least one of these, don’t give up and stop reading.

Because the next question is ‘Can you reposition your business so that you can say ‘yes’ to both’.

And the answer for most small businesses is ‘YES’.

The first thing you need to understand is ‘what’s a market niche’.

Here’s a definition and some examples.

A ‘market niche’ is ‘a segment of a market that has different customers, different products and a different way of doing business’.

Some examples.

Many people don’t realise that Dr Pepper has been making its soft drink since 1885. Coca Cola tried to copy them but failed. For some time at least, Dr Pepper was a star business in its own niche.

Similarly when Red Bull first introduced its energy drinks, it created a market niche. This time both Coca Cola and Pepsi tried to copy them – but again failed – and Red Bull remains a star business in that niche.

Another example at the opposite end of the spectrum – would yellow cars constitute a separate niche? Clearly not. They aren’t part of a fundamentally separate market.

So, what have these big business concepts got to do with your little ol’ business?

The answer is that exactly the same principle applies – just on a smaller scale.

Lets say you’ve just started up a hairdressing business.

How can you possibly ever become the overnight leader in your market; let alone be in a market that’s growing at 10%?

The answer lies in finding – or creating – a popular new market niche.

The first thing to understand in this example is that most people don’t travel more than 5-10 km to get their hair done. So your competitors only exist within that area.

The next thing to think about is ‘how can you differentiate yourself from your competitors – to the point where you have created your own niche’.

There are some actual tests you can use to do this. More to come on this in a future post.

Joe Bowers

7 thoughts on “Creating a star business – what’s a market niche?

  1. Jaymes Draper

    Great post Joe. I really like the way you make big business concepts relevant to small businesses using examples. Keep up the great work. You’ve given me a lot to think about. I look forward to the next post on this topic!

    Reply
  2. John Ostrander

    I believe that is my problem is my small business is not growing by 10%. I can’t answer and say “Yes” to both these questions. I will need to check back and see the coming post to see how I can differentiate from my competitors in my area. Even though this market isn’t growing I still have the business if I can compete.

    Reply
  3. Patty Franks

    Just starting out in a small business and I can answer Yes to these questions but what to do once I can answer these questions in where I am stumped. This is where I need the help and is why I am here.

    Reply
  4. Peter Nichols

    I’m all about niches – I love niches and it makes complete sense to me that you become an expert in one area rather than knowing a little about a lot. That said, all of my clients want me to handle everything to do with marketing/IT. It does make it tricky to say goodbye to potential income!

    Reply
  5. Andrew P

    Reading this made me think about what the company UBER is doing all over the world right now. It has transformed what people expect from car service and has taken it to a whole new level! I like how you made the connection between where a business may be now and where it can eventually grow. Taxi cabs and limousines have been the standard for years but UBER is cutting into their market shares swiftly.

    Reply
  6. Dana

    I always think that if somebody specialises in only one thing then they are an expert at that subject. It’s an interesting fact about people not traveling far to get their hair done. I can see how that makes sense now. Hairdressers are a dime a dozen but a good hairdresser is so hard to find. A hairdresser is only as good as their last haircut.

    Reply
  7. sarah evanston

    I really wanted to find a smaller niche for my clothing line but it was more difficult than I could have ever imagined. I went with a more broad market niche and decided to just do the extra work later as I build my brand. Are there any small niches left in the clothing industry?

    Reply

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