Whatever the product or service is that you offer – you will have competition. If you don’t have competition you need to be worried that you may not have a market. For you to succeed in your business, you need to convince the customer to buy from you instead of the competition. And that is easier if you are the market leader.
Market leaders not only have a significant advantage in terms of credibility over the other competitors in a specific segment, but there is also a positive correlation between profit margin and market leadership. Simply put, if you are the market leader in your segment, you will be able to have higher profit margins, everything else being equal. So how do you become the market leader, specifically if you are just a small and growing enterprise? The answer is surprisingly simple: Define the market that you want to serve in such a way that your specific offering makes you the leader in your chosen market segment.
In order for you to be the market leader, you have to be very clear and concise about exactly what it is that you offer to your customers. For example: You have decided to create a new type of soap based on all-natural materials. If you now choose to define your target market as “everybody who needs soap”, you will find that your growing enterprise has a market share that is so insignificantly small it’s not even worth mentioning. And it will be extremely difficult to stand out of the competition for people to choose your product over all the other soap manufacturing companies.
So you might take the next step and limit your service offering to only those people that choose soap made of natural raw materials over chemically produced soap.
Even with this limited market definition you may find that you are still just one of many other companies competing for the same business. By further limiting your market to only customers that support “Made in Malaysia” or “proudly homegrown by a women entrepreneur” you will eventually find a market in which you have the biggest share. That market by itself may be small, but you are the market leader nonetheless.
From here you may want to pursue two strategies: Firstly, defend your chosen market so that you remain the market leader in this segment. Secondly, expand your market definition slightly so that you operate in a market where you are not the market leader any longer, but you are number two or even three. Be careful not to widen the market definition too much, as your goal should be to become market leader in this expanded segment. Once you have achieved that, this new widened segment should become the market that you will have to defend for you to stay in leading position.
Using this strategy, you will continuously grow the markets that you serve, while remaining market leader in your chosen segment all the time – and over time this chosen segment will become big enough for you to have a very sizeable business.