Daily Archives: October 13, 2009

All Brands are Niche Brands

I loved the title of this recent article in Strategy + Business. All Brands are Niche Brands. It’s true. It doesn’t matter what you sell — automobiles (which the article was about), computers, music players, clothing, fast food, etc. You name it, it’s niche. It doesn’t even matter if the industry has a clear “market leader”, like Microsoft in operating system software, because, when you get right down to it, even though Microsoft might still have 85% of the OS market, they have so many versions that there is no true majority leader. Furthermore, as Linux and Mac OS X gain market share, their market is shrinking.

As Stephen Dubner and Steven Levitt, authors of Freakonomics, and Chris Anderson, author of the Long Tail, have noted, with a global population approaching Seven (7) Billion, two standard deviations from the mean is fast becoming a sizable market in its own right, with a potential market size of up to 280 Million (as only 95.4% of the global population is within two standard deviations of the mean). If we subtract the 39% living in poverty, and then restrict our market size to the middle class (about 45% in non-third world economies), that still leaves a potential global market size of up to 76 Million. And if even only 1% of that market would be interested in your product, that’s still a sustainable business for a small company.

Plus, with product proliferation almost out of control in some verticals — such as cell phones, media players, and clothing — it should be easy to see that niche markets are fast becoming the norm.

So next time you’re sourcing, remember that you’re not just sourcing a commodity, you’re sourcing a niche product for a niche market and, sometimes, differentiation does help.

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Three Simple Tips for Renegotiating With Integrity

A recent article in ISM’s eSide by Marc Freeman, who is the author of Renegotiating With Integrity: It’s Not Business, It’s Personal, offered three simple and straight-forward tips on what to do when you are in the uncomfortable position of having to tell a supplier that you can’t fulfill your current obligation. While never a position we want to be in, it is a position that we can often work out if we take the right approach. After all, there are many a supplier who would rather take a 50% volume reduction in this economy than a 100% reduction (which will happen if you go out of business, for example).

As per the article, renegotiating is the art of revising, altering or changing a previously negotiated contract or relationship. This means that the concept of win-win does not apply. You can’t expect to tell the other party that it won’t be getting what it expected and expect to turn it into a win-win outcome. This means that your focus should be on creating a scenario in which both parties are satisfied enough to move on. If you can move forward, then, when things turn around, the next time you go into a negotiation you might be able to look for the coveted win-win.

So what are the three simple tips?

Actively Listen

Once you have calmly and respectfully presented your case, you need to sit back and listen carefully. You need to find out what the supplier needs, not what the supplier wants. (You already know what it wants. It wants the same thing you want, to maximize its profit.)

The author claims that the best deals are often secured by supply management professionals who do the best job of listening, and all other things being roughly equal, I suspect that this is definitely the case. For example, he notes how he once secured a deal not by matching the price of his competitors, which he couldn’t do, but simply by reducing his price until the buyer could accept it and choose his product because everyone recognized the superior quality.

Be Nice

This means that you have to be genuine and respectful. You can’t fake it. You need to be someone the supplier wants to work with if you want to have any hope of a reasonable renegotiation.

Keep Track of the Orange Ball

The orange ball represents who’s in control. If the renegotiation isn’t moving forward in a suitable direction, you have to find out who has the orange ball and get it back.

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