Market niches are growth opportunities
SWOT and PEST(LE) analysis, ANSOF matrix — there are an overwhelming number of ways that businesses can try to analyse markets for growth opportunities. However, when ideas for new products and services come from a mishmash of people’s egos, opportunities are misguided and business growth is a muddied process. Instead, business should discover their own market niches in order to design products and services which grow a measurable market advantage.
A niche is a specialised and profitable section in the market. Naturally a niche is small to start with but niches are likely to grow when the value proposition is clear and meaningful to loyal customers. This makes niches particularly important for startup businesses who need to bring in early revenue or excite potential investors.
So, how do you find a market niche?
By analysing the market from the perspective of an experience, situation and context. In essence, a market niche is firstly understood through behaviours, not product segmentation. This is because a customer’s choices, motivations and decisions are determined by a specific moment where they need to get a job done in their life. As a result, a value proposition becomes clear and meaningful to them.
Allow me to indulge in a personal and rather embarrassing story below to illustrate this. (See footnote for an outline of analysis methods)
Early this year, I took a city break with a friend to London. The majority of our activities revolved around visiting the usual tourist sights and enjoying the nightlife. One evening, I wanted to wear a shirt which I had previously worn. When I started getting changed I became paranoid about it smelling of sweat and food from a previous evening. I suddenly had a job to be done: I needed to freshen my shirt now. What could I do? Well, previously I have used Wizz — Fabric Fresh to spray my clothes, however I did not have time for this to dry, it is too wet, and I hadn’t brought any to London. I did have a bottle of Jean Paul Gaultier fragrance with me but that would be too strong to use in great quantity. At last resort I could wear a different shirt, but then again I would have to change my belt and shoes with that outfit. What could I do? I sat down pondering over my options and looked up to see my friend spraying himself with — Lynx Body Spray. Aha! This works! Not too wet. Not too strong. I can freshen my shirt now.
To sum up the job. Functionally: I needed the effect of a fresh shirt as I wasn’t able to use a washing machine. Socially: I needed to wear my favourite shirt that worked with an outfit and was different to my friend’s. Emotionally: I needed to be confident that I smelt good and not of the previous evening’s activities. Cue — Lynx Body Spray.
There’s no defined market for the notion of body-spray-that-freshens-clothes and you’re unlikely to discover the opportunity if you analyse through traditional product segmentation. Therefore the market niche can be much more clearly understood through behaviours; through an experience whilst getting ready with a friend for a night out in London.
Take a look at how the new Lynx Black Body Spray is advertised below. The way the packaging is designed to be held and easily sprayed. The way the spray dries quickly and retains a level of subtlety. As a result, the market niche is defined by Lynx with a clear and meaningful value proposition.
At NEU we tend to use the following four analysis methods: observe your current customers, study your potential customers, watch for compensating behaviours and, ask why multiple times and listen carefully.
For further reading see: Integrating around the jobs to be done