Niche Strategy: Secrets of 6 Successful Upstarts
Sun Tzu said that “the supreme art of war is to subdue the enemy without fighting.” There’s merit to considering that course in business too. Starting in a niche could be one way to get avoid a direct confrontation with established competitors. A viable niche strategy is predicated on identifying segments where consumer needs aren’t being met particularly well, that are big enough for a challenger to stake a claim, but too small for category leaders to defend vigorously. If Sun Tzu was around today, I think he’d be a proponent of niche strategy.
Put simply, in the early stages, it’s often better to be perceived as a pest rather than a threat. A niche strategy can accomplish that.
I think Adam Morgan and Eat Big Fish had it right with this point: “A challenger brand is defined, primarily, by a mindset – it has business ambitions bigger than its conventional resources, and is prepared to do something bold, usually against the existing conventions or codes of the category, to break through.” While Morgan’s work was aimed primarily at trailing brands in larger categories rather than niche competitors, the mentality can be healthy regardless of position. My aim is a bit different. Starting in a niche can often make the most sense and then – after gaining a foothold – building out from there.
Here are six examples of companies that did just that…
With high brand awareness, usage, and regard, WD-40 is a category-defining brand. It’s available nearly everywhere. In spite of – or maybe because of – that, brands like WD-40 can be vulnerable to niche competitors. Finish Line took on WD-40 with a purpose-built line of bicycle products, sold specifically through independent bike dealers, with a distribution and margin model that fit the channel. By doing that, Finish Line became the bike shop recommended brand against WD-40 which was sold everywhere. Finish Line went on to establish a worldwide lead in the bicycle channel and also added mass retail distribution. Lessons: Look at enthusiast channels where category products are filled by mass brands. Establish a purpose-built line with marketing and distribution tailored to the specific channel and consumer needs.
The bicycle helmet category is dominated by the likes of Bell, Giro, and a handful of other brands all of which are recognized, available, and with scale behind them. They’re functional and utilitarian…and perhaps a little too plain. Nutcase carved out a chunk of the market by offering equally functional helmets but with unique graphics. And then found markets in Europe that valued their design aesthetic. Lessons: Competing with established brands does require differentiation in product and business approach. And then find someone who cares. For more on the Nutcase Helmets strategy, click here.
Frostier, heavier, pricier…
A few years ago, if US consumers could name a cooler brand, they’d likely pick Igloo…by a long shot. The products were functional, widely available, and inexpensive. Yeti found a technology that enabled coolers to keep items cold far longer with the durability to support people standing on them. Yeti coolers were also significantly heavier and far more expensive. They launched into a segment (fishing) where their product strengths aligned with consumer needs. And then built out a $500 million from there. Lessons: Know your consumer target needs, solve those problems, establish price based on value delivered, and begin by focusing on the consumer segment most receptive to that value. Click here for more about the Yeti Coolers strategy.
Clorox, Colgate-Palmolive, and Proctor & Gamble brands are the household names in household cleaners. They dominate consumer awareness and shelves in stores. Competitors have pursued the category with formulations, fragrances, and pricing. It’s always proved to be hard road. Method came along with organic formulations and a design approach to packaging. They also read Target’s interest in design and cut an initial exclusive distribution deal. The foothold in Target gave them a base from which to build into other retailers. All in, Method sales reached $100+ million in few years. Lessons: Figure out where consumer and customer interests intersect and jump there.
The adhesive category is crowded and complicated. In the US, Elmer’s had a dominant mindshare and broad product line but others played a role. Different product formulations are required for different applications. As a result, consumers were challenged to decide which product to use for each application. Gorilla Glue built on a single product formulation whose versatility simplified the consumer decision. They started in a niche (woodworkers) who needed the product but also where they could cultivate a following. They built out from that niche and expanded the product line. Along the way, Gorilla reached more than $300 million in sales. Lessons: Understand the consumer problem, simplify the decision for retailers and consumers, gain traction in niche first, and then build out from there. For more insight into the Gorilla Glue strategy, click here.
Going to the dogs
According to Statista, Purina controls 25% of the dry dog food category in the US, followed by private label at 15%, and Pedigree with 10%. There are a broad range of price points and distribution. The Honest Kitchen was founded on the need to resolve a health problem with the owner’s dog. Their premium human-grade ingredient formulation addressed the health issue and was appealing to certain consumers. Rather than compete head to head with the big, mass retail brands, The Honest Kitchen focused distribution in independent stores and online where consumers would be able to learn more about the product. And they’ve built a $40+ million business. Lessons: Understand the consumer need, understand the success factors for the product and category, distribute in places that align brand needs and consumer questions. For more about The Honest Kitchen’s path, click here.
While each brand story and category dynamics were different, there were some common threads among these successful businesses…
- Founders identified and committed to solve a clear consumer need.
- Solutions delivered noticeable product differences and benefits.
- Linked to an enthusiast user/consumer.
- Backed by clever marketing support.
- Started in a niche and built out from there rather than trying to be everything to everyone, too soon.
As a final note, the established brands in these cases did eventually respond. For example, WD-40 came out with a bike product line. Igloo launched a rugged roto-mold cooler. Bell introduced graphics onto their helmets. The big household cleaners brought design-savvy packaging to market. Elmer’s added a polyurethane glue. Still, the newcomers’ thoughtful niche introductions enabled them to gain a foothold and – most important – keep it.
Mike Irwin is an advisor, blogger, mentor, operator, and strategist. Drawing from his past as a startup co-founder/President, executive officer of a $1+ billion market cap company (WD-40), public company CFO, VP Marketing, global chief strategy officer, head of sales, and board member, Mike uses his diverse background to help companies grow sales, improve profitability, and scale up. He serves as an advisor, consultant, fractional or interim CEO/GM/MD, and on boards of directors. Follow him at BottleRocketAdvisors.com, get in touch at firstname.lastname@example.org or connect on LinkedIn.
Photo credits: Bell Helmets, Elmer’s, Finish Line USA, Gorilla Glue, Igloo Coolers, Method, Nutcase Helmets, Proctor & Gamble, Purina, The Honest Kitchen, WD-4o Company, Yeti Coolers.