Finding your niche

April 23, 2013

One of the most common questions I get from my clients and audiences is how to find better markets. Regardless of whether I am addressing crop farmers in the Canadian prairies, food companies in the US, seafood producers in Ireland or local farmers here in British Columbia, the need to escape the undifferentiated commodity market is close to universal.

In my opinion, there is a simple reason for this. I usually explain it by joking about commodity markets being 95% price and 5% psychology, while niche markets are 95% psychology and 5% price. Of course, the percentages must not be taken literally. My point is that for commodities, since all the physical qualities of the offerings are similar, the (almost) only decision factor to choose between suppliers is price. All other arguments do not weigh much. For producers, this is often frustrating because it is a cold-hearted process in which the market decides. They feel that they have no control about the price setting, which is true for the most part. Although futures markets are there to help farmers limit the price risk, the lack of control in the actual price setting contributes to uncertainty, especially for producers in region with a relatively high production costs. In many developing countries, the disconnection between farmers and the markets presents similarities with the above. The lack of access together with the lack of control is a major impediment for the development of strong and successful farming operations.

Then, is niche marketing the way to go? Before answering this, it is useful to take a closer look at what a successful niche is about. Probably the best way to visualize it is to look at it from Maslow’s pyramid of needs, and look at which gradients we can define as we climb up the pyramid.

Niche &MaslowClick on the picture to view enlarged chart

The first one that comes to mind is that the bottom of the pyramid represent the need for generic cheap commodities and the top the exclusive luxury niches. The second one is directly derived from the previous one and from the content of the pyramid. It is the amount of emotion and psychology involved in the customer’s choice. This means that the level of quality also must increase as we go up the pyramid. Similarly, the level, and the quality, of service are also more important, as the target group lies higher in the pyramid. These differences clearly mean different way to conduct business. A solid niche is difficult to enter. If it is not, then many followers will rush into it, commoditize it and destroy it in no time. The difficulty can have very different reasons. It can be technical. It can be organizational. It can be commercial. It can be a matter of logistics or of planning. Whichever the reason may be, the message is clear for the producers: they must have the specific know-how to serve the niche well. They need to have the right set and the right combination of skills in-house. If done well, the development of a niche will also result in higher and more predictable margins, as well in the short term as in the long term. This has a lot of value to food producers, because they can plan ahead much better. Another important aspect of a solid niche is its growth potential. A good niche will grow. Of course, it will not become a commodity market, but that is what the producers want to avoid. If the niche has no growth potential, then as a producer you will be stuck and will need to find other solutions somewhere else for your business. This is why a niche has to be market-driven. There is no way that a production-driven approach will develop a niche successfully in the long term. It might work for a while, but putting production first will weaken the concept eventually.  Good niche management requires a deep connection between the producer and the customers. Developing a niche is not a marketing gimmick. It is not wrapping the old product or service in a new packaging. It is easy to make claims about sustainability, social responsibility or other concerns of consumers, but a good niche is not about the superficial stuff. It is about mutual dependence and shared value. To succeed in niche business, producers must be passionate about what they offer. They must believe in their vision, in their product and in their customers. They must commit to them and engage in a true partnership. If this is not the case or if it is not mutual, the honeymoon will be short-lived. Beyond the common vision and goals, what really counts is to speak the same language. Speaking the language of the customer is not enough. A good niche is one where customers want to buy from you, not having you hounding them for more sales. Good niche marketing rests on collaborative planning with the customers.

Although the comparison with Maslow’s pyramid of needs is useful, it is also important to realize that it does not necessarily means that a niche be tiny. Niche marketing is not the same as local and/or micro business. Especially in a world where purchasing power is evolving and where a huge middle-class with increasing disposable income, as well as a growing upper-class, are rising in populated emerging countries, niches may actually be quite large in comparison with the traditional Western markets.

Because there is such a need for niche developement, I am offering a specific program here at my company to help producers who want to walk the niche path. In my professional life, I have had many jobs and projects that were about getting away from the undifferentiated market and develop specialty markets that generate higher margins. The reason is that the production units where in countries with so-called uncompetitive production costs. Despite that, I successfully turned around difficult situations by setting up adequate strategies that capitalized on the strengths of the businesses and took them away from their areas of weakness.

Developing successful niches takes time and perseverance. For instance, it took me three years to get the poultry company I was working for to be approved as a supplier to Marks & Spencer. It also took some painful human resources decisions to turn around the sales activities I inherited in Germany. It took a lot of energy to lead for change here in British Columbia in an organization that was all about production and with no marketing skills, just as it took a lot of energy to convince the market that our new strategy would work (focusing on Chinook salmon instead of Atlantic Salmon) because many tried before and finally gave up. Yet, we did it and in half the time from what was stated in our supposedly very ambitious plan, and both the company and the customers benefited greatly from this move. I must also state clearly that to achieve such outcomes, I had set up teams with the mix of the right skills and talents to execute my vision. Nobody can do everything alone. That is valid for yours truly just as well. I am quite thankful for the great people who joined me in these endeavours and made it happen.

The difficulty to enter the niche protects you from the competition, but you also must pass the hurdle yourself. This means that you need to have the capacity to be stronger than your competitors. If you are not, realize that you will have difficulties to stay in business anyway.

Copyright 2013 – The Happy Future Group Consulting Ltd.


My futurism

April 16, 2013

The future has had the same intriguing appeal since the dawn of time. The reason is simple. Trying to predict the future is simply about reducing uncertainty. Looking into the future is about anticipating change. It is about preparing to adapt. Regardless of whether the motivation is fear, greed, pride, power or any other reason, the urge to foresee the things to come is really about one goal only: survival.

The material I offer focuses on how the future will affect my customers and what they can do to adapt and thrive. My approach to futurism is centered on how my clients can turn future changes into a competitive advantage for themselves. One of my main objectives is to show them how their activities are actually interconnected with developments that seem out of their daily world. It is quite easy to overlook these connections, but they exist nonetheless and will have an effect. Bringing the big picture helps create awareness and stimulates critical thinking, curiosity and questions. It makes the experience active and lively. The big picture broadens the scope away from the tech gadgets innovation part. It includes the human dimension, and the interactions between people and technology. It initiates a reflection about what to do and to use, as well as what not to do and what not to use.

In that regard, I could describe my form of futurism as practical and applicable. I do not limit my presentations and seminars to storytelling. Setting up a science-fiction-like story is rather easy to do. In very little time, anyone can gather the latest news about technological advances by going on internet and doing a search on these topics for agriculture and food. It probably will make this very website pop up high on the list. I have to admit that presenting scenarios that sound like science fiction always appeals to audiences. It has the mystique of an ideal world in the making where all problems will be solved by science and new technologies. Such an approach of futurism is fine for entertainment purposes. Journalists, writers and performers will excel in this kind of exercise. It is true that technology has brought many new possibilities. It has helped overcome many challenges, as well as it has open new frontiers. However, technology alone is not enough to describe the future. Especially not in an activity that depends so much on nature’s laws and nature’s forces as agriculture and food.

My Futurism

As a futurist, I often get the question of whether I have a crystal ball. It could be useful to have one, but so far I have not heard of any futurist predicting that crystal balls will ever exist. Ironic, isn’t it? Especially more so when some predict things as bold as plants will communicate to each other, as I read recently. If we can insert some sort of a nervous system in plants, I am sure crystal balls have to be in the realm of possibilities. Futurist can’t support that. I suppose it would put them out of business. I do believe that artificial intelligence will help replace them, as the technology will help create machines that can analyze faster, better and without interference from emotions and bias. One tempting pitfall to fall into is to try to make exact quantified predictions on market components, in particular prices and volumes. Until this day, I have seen many of such predictions fail quite sadly. After all, even computer models must contain in a factor of uncertainty. Personally, I do not try to give exact numbers, but I explain the trends and the dynamics behind to show in which range such specifics would land. Since food production and consumption can be influenced by many factors on which we have relatively little control, it is always good to remind audiences of such uncertainties. Although my approach may not appear particularly bold, my predictions are of rather good quality (click here to some of my past predictions).  For instance, when I started giving presentations or participating in panels, I crossed skeptical looks when I was telling that Africa is a region that has tremendous agricultural potential and that opportunities abound there. It has been ice since then hearing some of my apparently skeptical clients now seeing that continent as a key one for the future and theirs as well. Similarly a few years ago, I received amused smiles when I was mentioning the rise of robots, drones, sensors and other futuristic devices that would help farmers make better and faster decisions, and that in a time when I hardly ever heard any of the futurists talk about them. Now, most of them bring up this same topic. Yet, the information had been there all along. It was rather easy to know what was in the works. By then, agriculture had not reached the level of fancy it has lately. That will pass and practical analysis will replace entertainment. I also prefer to not make many predictions, which saves me from ending up tongue in cheek. I always give the preference to the sensible and the prudent. Until this day, it has helped my predictions to be accurate and valuable to my business partners.

Another important thing for me is to stick to a sector that I know and understand. I do not believe it is possible to have enough insights in everything. The more sectors one wants to follow thoroughly, the thinner the outer layer of practical and applicable knowledge he/she can bring over. The risk, in my view, is to fall back being the storyteller with the nice tech gadgets of the future. It is entertaining, but with little direct use for my public. I follow many sectors, always with the angle of what it might mean to food and agriculture. I am convinced that many developments that will help food production progress in the future will originate in other areas, but I am not going to pretend I am an expert in all these sectors. I stick to food and that is already vast enough a domain.

From my end, what I want is that the members of my audiences can go back home with several concrete points that are important to their work and that will affect them one way or the other during their professional life span, not in 50 years. Ideally, I wish they can start using my material the next morning to build a better future for themselves. Considering the lines of people who wish to speak to me after my presentations and the number of contacts that I receive afterwards, I believe that I reach both my goal and theirs.

With this philosophy in mind, I will add soon several programs that will be useful for my customers to envision, shape and build the future.

Copyright 2013 – The Happy Future Group Consulting Ltd.