Most of the successful small firms that I have studied have successfully positioned themselves in a market segment where they have little significant competition. This allows room for a decent profit margin and focuses the firm’s efforts on pleasing the customer, while not on worrying about what the competition will do next.

While this is true, some experts suggest that you should literally hide from the competitors. The problem that I have with hiding from competitors is that you may also be hiding from customers. It is hard to create a market for a new product or service if no one knows about you. You need to make a lot of noise.

A common positioning strategy is based on an innovative product. Innovation is cool, but it requires a special customer who wants to be innovative, too. You can burn a lot of rubber trying to find that innovative customer. If you cannot find any competitors who are making money in your market segment, you may want to ask yourself if there is really a business there anyway.

Another approach that is successful and can provide a possible exit down the road is to compete against big and dumb companies or institutions. Competing against smart and big competitors can be hard; when they have seemingly endless resources, it can be lethal. Big and dumb firms allow you the chance to steal their customers without their even knowing it since your firm is so small by comparison. To do so requires specialization that your customer values.

The best example of big and dumb that I can think of is the U.S. Postal Service. Two centuries of tradition and bureaucracy have made the U.S. Postal Service one of the most lethargic and disconnected institutions on earth. By providing a similar service without the lethargy and bureaucracy, FedEx grew into a marketing giant. FedEx delivers the next day with greater than 99% accuracy, which is something that the U.S. Postal Service still cannot figure out.

You can see that when competing with big and dumb competitors you might get access to a real customer base and make a nice living. By the time the big and dumb firms find out about you, your company has prospered and grown to such an extent that the big and dumb competitor might just have to buy you out at a premium. Name your own price because as you know, they are big and dumb.

In my mind, the best positioning strategy for niche market players is targeting the under-served or overlooked market.

John Bradley Jackson
© Copyright 2008 All rights reserved.

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