When selling a product or a service, companies often focus on finding an existing niche or demographic that is underserved and tailoring their offering to meet that need. Pick the right niche and a business is likely to succeed. But pick the wrong niche—too small, too specific, or too difficult to reach—and success suddenly becomes much harder to attain. What went wrong? According to a team of American and Chinese researchers, your product could be attracting a niche you do not want, the so-called “harbingers of failure.”
This week’s insight: If your product or service is reaching a very small niche with needs or preferences far outside the mainstream, it may be difficult to scale enough for success.
Research study: “Harbingers of Failure” by Eric Anderson, Song Lin, Duncan Simester, and Catherine Tucker, Journal of Marketing Research, October 2015, https://journals.ama.org/doi/abs/10.1509/jmr.13.0415
What they did: The research team examined records from a major American retailer to see which customers bought which types of products, and how those products fared three years later.
What they found: A certain group of shoppers which they dubbed “harbingers of failure” regularly bought products that later failed to gain traction in the marketplace and were pulled from store shelves. It’s not that this sub-group had particularly bad taste or represented some sort of lowest common denominator shopper. Instead, these “harbinger” shoppers have highly specific, unconventional or experimental tastes, choosing products that fit their desires but rarely reflect the tastes, needs or interests of a wider group. Because the “harbinger” niche is so small, if they are deeply interested in a product, researchers found it was a good indication that that product would fail to establish a foothold in the market and would not reach a wide enough audience.
How to find these “harbingers” in the first place? Look at what your potential customers are purchasing in addition to your own product. If they are goods and services generally favored by other mainstream customers, you may have found a smart niche. If your potential customers are favoring products that inevitably flopped, you may have targeted too narrow or too unconventional a market, and might have trouble gaining traction.