“Entrepreneurs are simply those who understand that there is little difference between an obstacle and an 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 neglected or overlooked can earn extraordinary rewards. Niche marketing requires you to focus on customers who can’t get what they want or need from your existing vendors. For various reasons, major companies often innocently or deliberately overlook customers with special needs; instead, they will choose to market to the largest and most homogeneous customer groups. These underserved or overlooked segments can be very fertile ground for entrepreneurs to exploit as they need a vendor that truly understands their requirements.

By targeting these customer segments, the business owner can differentiate their offerings from the competition while creating loyal customers who will be a source of referrals. Additionally, the entrepreneur can be rewarded with higher margins and longer product life cycles. Every entrepreneur must know that to be successful in niche marketing, he must be the first, the best or different.

Being first may be enough in some markets to capture a huge reward. A company can differentiate itself by being the first to solve customer needs; these customers and their unique needs may have been overlooked by other companies. Unfortunately, it’s hard to defend that position in the long run, assuming the market is big enough for more than one competitor. Sometimes being the first creates a strong “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 everyone 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, enthusiasm for the first product is muted, making the first company a “one-hit wonder.” Therefore, being first is rarely sustainable in the long run.

Being the best can be the optimal state for the entrepreneur. This means that the solution provides exactly what customers need today; More often than not, this fit stems from an intimate understanding of customers’ wants and needs while delivering a perfect or best solution. Customers value the solution above all others and can tolerate paying a higher price. Due to their loyalty, they can even be a source of referrals for your company, helping to create a dominant position in the market. The challenge in this case is how to stay on top. If the market is big enough, other companies will eventually want a piece of this market. If competitors have enough capital and barriers to entry are low, the first entrepreneur may have a hard time defending his best position. Being the best is easier when the market niche is very small and your company is the only important player. This positioning may be the “nirvana” of niche marketing, but I don’t know many of them.

This leaves to be different as the remaining option for most of the entrepreneurs. In this environment, the solution offered is unique enough to be a better option for customers; an example of this could be the Ferrari. The Ferrari, with its unique styling and high-end performance, is seen as different to the point of being exotic and is highly valued by a special segment of car buyers. Ferrari has a loyal following, has few real competitors, and commands a premium 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 common product like a cup of coffee is delivered, packaged, and sold as a lifestyle item. In return, Starbucks demands a premium price and is rewarded with incredible brand equity. We can argue about the quality of their products, but essentially, they are doing things differently instead of 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, absolutely the best, or clearly different from the competition. While it may be “possible” to be all three (first, better and different), the challenge for the business is to be sustainable in the long term. Can you name a company that is first, best and different and has stood the test of time? It is truly a short list and subject to much debate.

Coca-Cola comes to mind as a company that could be first, best, and different, but some would argue that the company is first, best, or different. In fact, Coca Cola was beaten on the market by a “coca wine” that was initially sold as a headache medicine; but Coca-Cola was the first mass-marketed soft drink. Pepsi drinkers might argue that Coke isn’t the best by citing the “Pepsi Challenge,” which was a blind taste test that showed cola drinkers preferred Pepsi over Coke. Is Coca-Cola different? People have voted yes with their Coca Cola dollars surpassing $43 billion in revenue in 2005; remember, “Coca-Cola is.” There is no doubt that Coca-Cola has been a sustainable brand; was founded in 1886 and has been a cultural phenomenon. It must be said that Coca Cola is not exactly a niche player, but it illustrates the point that it is difficult to be all three: first, better and different.

Therefore, the options left to the successful entrepreneur tend to favor creating a unique offering for a special customer who has not been served well or at all by the other vendors; this is the essence of niche marketing. As for which niche to choose, that’s up to you. Making that choice a reality then becomes a matter of designing, implementing, and managing your niche marketing strategy, which we’ll explore in more detail in this book; But, before launching into this strategy, you must define your purpose.