Yes, there are still things to be invented. How about square watermelons and glass floor mats?

Japanese urban dwellers live in notoriously small houses and apartments which in turn have tiny refrigerators. Watermelons are considered a delicacy in large part because of their size and storage issues. Because of this storage issue, watermelon is a favorite at Japanese restaurants, but they are seldom served on the kitchen table.

A farmer from Zentsuji in the Kagawa prefecture has solved the problem by growing the round fruit while still on the vine in a square "Plexiglas" box. When full grown, the square melon is removed the box and harvested. Note that all the melons are the same uniform size.

These easily stored watermelons are sold in upscale markets for three times the price of conventional round melons. By North American standards, the watermelons are small (10inches square). But for many, the price premium is worth it since otherwise they probably would not buy the larger round variety.

What I love about this story is the new twist on an old idea. Here is another new look at an old idea.

I have a friend named Ken who has created a start up company, which makes chair mats out of tempered glass. Similar to the round watermelons, conventional chair mats are pervasive but problematic for many people (see KBJ Enterprises LLC at http://cihop.com/)

The traditional plastic chair mat ages quickly, develops ruts, and becomes difficult for the chair to move. Because of this wear and tear they need to be replaced every few years. Frankly, as a person who sits at his desk all day long, I hate plastic chair mats.

Ken's floor mats are made of tempered glass providing an ageless surface which allows your chair to move easily. No ruts. And no replacement needed. I suppose you could say that they are beautiful when compared to plastic floor mats after a couple of years of use. Like the square melon, the glass floor mats sell at a premium but from my perspective they are well worth it.

Both the square watermelon and glass floor mats are perfect examples of niche marketing-they both target a customer who was overlooked or underserved by the bigger players. The happy customer gladly pays the price premium to get what they want.

John Bradley Jackson
© Copyright 2008 All rights reserved.

Maybe the smartest money ever spent by an entrepreneur is to conduct a “concept test” which is basic market research on an offering before you go to market. Concept testing can use qualitative or quantitative research methods; most commonly, qualitative tools such as in-person interviews and focus groups are chosen for their expediency and live feedback.

Essentially, prospective customers are given an early viewing of an offering to assess their reactions before the provider invests more money in the new offering. It forces the entrepreneur to expose the offering to the customer base to solicit real feedback. The test verifies that the benefits of the offering are recognized and valued by the customer. This feedback is essential but sometimes difficult for the entrepreneur to accept, particularly if the feedback is negative.

Sometimes, the test identifies problems such as possible confusion about how the product is positioned with competing products. Often the marketing messages are still in draft form, so this concept test also assists in refining the basic messaging. In fact, concept tests are frequently performed for advertising campaigns to verify that the target customer can understand the benefits of the products.

However, concept testing may not be a good indicator of purchasing behavior. Just because someone understands the benefits of a new product and even admits to liking the product, it does not mean that they will buy it. Additionally, concept testing may identify product attributes that are significant but this type of research can struggle to assess which attribute is more important.

Concept tests typically try to answer the following questions:

1. What is unique about this new product or service concept?
2. How does it compare to competitive offerings?
3. How might it benefit the customer?
4. What are the relative strengths and weaknesses of the new product or service concept?
5. Would the customer buy the product (admittedly not a reliable vehicle to get this answer),

Ironically, many startups and entrepreneurs go to market without conducting a concept test; instead, because of their strong belief in the product or service concept they often elect to skip this step. The ramifications are many including failure.

“Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage.”

Niccolo Machiavelli (1469-1527) Italian writer and statesman

The entrepreneur who finds a customer segment that has been underserved or overlooked can earn extraordinary rewards. Niche marketing requires that you focus on customers who cannot get what they want or need from their existing providers. For various reasons, mainstream firms will often innocently overlook or deliberately pass over customers with special needs; instead, they will choose to market to the larger, more homogeneous customer groups. These underserved or overlooked segments can be very fertile ground for the entrepreneur to exploit, since they need a provider who truly understands their requirements.

By focusing on these customer segments the entrepreneur can differentiate their offerings from that of the competition while creating loyal customers which will be a source of referrals. Additionally, the entrepreneur may be rewarded with higher margins and longer product life cycles. Every entrepreneur needs to know that to be successful in niche marketing you need to be first, best, or different.

Being first can be enough in some markets to capture a great reward. A business can differentiate itself by being the first to solve the customers’ needs; these customers and their unique needs may have been passed over by other firms. Unfortunately, it is hard to defend that position long term, presuming the market is big enough for more than one competitor. Sometimes being first creates a loud “buzz”, a public relations euphoria associated with the new solution. You may have witnessed this buzz in the software industry when innovative products hit the market. The product is the “new thing” and everybody seems to want it, at least until something faster or better comes along. When a second player enters the market with a better product, and this is often the case, the buzz for the first product goes silent, making the first firm a “one-hit wonder”. Thus, being first is seldom sustainable in the long term.

Being the best may be the optimum state for the entrepreneur. This implies that the solution provides exactly what the customers need today; most often this fit is derived from an intimate understanding of the customers’ wants and needs while offering a perfect or best solution. The customers value the solution above all others and may tolerate paying a higher price. Because of their loyalty, they may even be a source of referrals for your firm which helps create market-share dominance. The challenge in this case is how to stay on top. If the market is big enough, other firms will eventually want a piece of this market. If the competitors have sufficient capital and the barriers to entry are low, the first entrepreneur may struggle to defend its best position. Being best is easier when the market niche is very small and your firm is the only significant player. This positioning may be the “nirvana” of niche marketing, but I don’t know of many of them.

This leaves being different as the remaining option for most entrepreneurs. In this environment, the solution offered is unique enough to be a better choice for the customers; an example of this might be the Ferrari. The Ferrari, with its unique styling and high-end performance, is considered different to the point being of exotic and is highly valued by a special segment of automobile buyers. Ferrari has a loyal following, has few real competitors, and commands a very special price for the car’s unique attributes.

Alternatively, things can be done differently. My favorite example of doing the same thing differently is Starbucks, where a pedestrian product like a cup of coffee is delivered, packaged, and sold as a lifestyle item. In return, Starbucks commands a premium price and is rewarded with incredible brand equity. We can argue about their product quality, but essentially, they are doing things differently rather than offering something different. Being different or doing things differently tends to be the domain of many successful entrepreneurs.

To be successful, an entrepreneur has to be first to market, has to be the absolute best, or has to be demonstratively different from the competition. While it may be “possible” to be all three (first, best, and different), the challenge for the business is to be sustainable over the long term. Can you name any businesses that are first, best, and different and have stood the test of time? It is truly a short list and subject to great debate.

Coca Cola comes to mind as a firm that might be first, best, and different, but some would argue about the firm being first, best, or different. Coca Cola was actually beat to market by a “coca-wine” which was initially sold as a headache medicine; but Coke was the first mass-marketed soft drink. Pepsi drinkers might argue that Coke is not best by citing the “Pepsi Challenge”, which was a blind taste test that showed that cola drinkers had a preference for Pepsi over Coke. Is Coke different? People have voted yes with their dollars with Coca Cola topping $43 billion in 2005 revenues; remember, “Coke is It.” There is no doubt that Coca Cola has been a sustainable brand; it was founded in 1886 and has been a cultural phenomena. It must be said that Coca Cola is not exactly a niche player, but it illustrates the point that it is hard to be all three: first, best, and different.

Thus, the choices that remain for the successful entrepreneur tend to favor the creation of a unique offering for a special customer that has not been served well or at all by the other providers; this is the essence of niche marketing. As for which niche market to choose, that is up to you. Making that choice a reality then becomes a matter of designing, implementing and managing your niche market strategy, which we will discuss in much detail in this book; but, before launching this strategy, you must define your purpose.