The way out may be narrow but it’s easier than enlarging the opening.

When times get tough as they are now, rather than trying to expand your market, have you thought about reducing it? If you can appeal to a small segment of your market with something remarkable, you will achieve a greater share of that specific segment. You’ll also get better margins by addressing a specific need or want rather than attempting to achieve mass appeal. Sometimes it’s better to reduce market share than it is to reduce expenses.

This might sound odd but consider the cost of fighting your competition to simply to maintain market share during an economic down turn. You’ll fight with two expensive weapons: price and promotion. Competing for the fat center of the market will hurt margins because you will have to compete on price. Because the fat center is where the competition is, you’ll have to spend more on advertising. Even if you win, you lose because you kill margins and raise costs. This normally initiates the cycle of “reduced head counts”. You’ll try to reduce costs to survive as you continue to compete for a piece of the market you will never win.

If you play it smart, you can grab whole segments and let your competition fight it out over the bulky middle. Scrapping for the biggest market segment will cost you more in advertising and will hurt your margins.

Better to rip a solid chunk off the edge and own it.

Chris Reich, Author of TeachU’s Business Talk Blog
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