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How Your Startup Can Compete in a Super Competitive Niche

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The average person looks at competition in an industry and assumes that it’s not good for business. But the reality is that heavy competition means major opportunity – even for startups that are still trying to land on their feet.

The Benefits of Competition in a Startup Environment

Conventional wisdom says less competition is better. The idea is that a young business has a much greater chance of being successful if it’s the only one in a market, versus if it has to go toe-to-toe with larger companies. Entire books, business courses, seminars, and company manifestos have used this premise as a foundational building block. But recent research challenges this commonly held notion.

The research, conducted by Andrew Burke and Stephanie Hussels of the Bettany Centre for Entrepreneurship at Cranfield University, analyzed nearly 2 million British companies launched between 1995 and 2005, specifically looking at the competitive environments the companies faced in their first few years and how long they remained in business.

“We found that companies launched in crowded markets had higher odds than others of failing in the first year—but if a company survived during this early period, it had a much greater chance of making it to the three-year mark,” Burke and Hussels write for Harvard Business Review. “A firm’s early exposure to competition appears to have an immunizing effect, in much the same way that a person’s exposure to illness can create antibodies that provide long-term protection.”

But what is it about heavy competition in the early stages of business development that give a startup a greater chance of being successful? Business experts and entrepreneurs have an array of theories and guesses.

For one, competition proves market demand for the product or service that’s being sold. This allows companies to shift attention towards the issues and elements of business growth that really matter.

Burk and Hussels theorize, “ A challenging environment causes start-ups to be tightly focused on satisfying customer needs along with lowering and containing costs.” In the end, this strategy – which Southwest Airlines used when launching in the 1960’s – creates excitement in the marketplace and satisfies key customer pain points in tangible ways. 

Practical Tips for Coming Out on Top 

The key to being successful in a competitive niche is to make it out of the starting gate and survive for the first few months. You’ll take your licks along the way, but the longer you hold on, the greater your chances are of experiencing sustainable success.

Here are a few practical suggestions and strategies: 

  1. Understand Your Audience

Being successful in a competitive niche is all about satisfying your customers’ needs better than your competitors can. And to consistently do this well, you must have a thorough understanding of your audience.

Before you spend a bunch of money on developing a product or building out a service, make sure you understand who your audience is, what they want, and how they’re currently dissatisfied with the options they’re being presented with by the competition. 

A detailed understanding of your audience will lead to better product development and more effective marketing and advertising strategies.

  1. Be Transparent

The internet has bridged the gap that used to exist between businesses and customers. Whereas many businesses have traditionally used retailers to sell the products they produce, ecommerce and advances in supply chain logistics have led to an increase in the number of direct-to-consumer businesses in a variety of niches – including the mattress industry.

The problem is that the industry becomes insanely crowded. It seems like a new “mattress in a box” company is popping up every week. So how can new startups in niches like these stand out? It comes down to transparency.

Sleep Republic is a great example. They’ve made it a point to show customers exactly what’s inside their mattresses, how they’re made, and what makes them so effective. As a result, customers feel more confident in their purchase decisions.

Whether you’re selling mattresses or candy bars, transparency will take you a long way. It builds a stronger connection with customers and reduces much of the friction that’s associated with buying from a new company. 

  1. Listen and Refine 

Finally, make sure you aren’t too set in your ways. As a startup in competitive niche, you need to constantly listen to customers, collect data, and refine your approach based on the results you achieve. What you’ll discover is that you end up shifting away from the original product offering and into a more specific and useful direction that sets you apart from the competition in a positive way. 

Use Competition to Your Advantage 

At first glance, competition is scary and intimidating. Most people would rather not deal with the issues it brings, so they run to something easier. But the truth of the matter is that competition can be good for young upstarts. By learning how to use it to your advantage, you can achieve the results you desire.

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