Scalpels for left-handed surgeons.
Energy bars for vegan ultra-marathon runners.
Lightweight, customised harness belts for speed-climbers.
Replicas of the world’s most famous buildings for tropical fish aquariums.
A social network for billionaires.
All of the ideas above might be possible high-quality products, which would be extremely sought-after by the target market.
They might perform better than the competition.
They might even have high profit margins due to their exclusivity.
But can a business become profitable if that is the only product in their portfolio?
If the total number of potential customers in a market you can reach is too small, and you will only ever be able to convince a small segment of that market to buy your product, then you are limited to how large you can grow.
And without economies of scale, the total gross profit you make from that one product may not be enough to cover all of the fixed costs in the business, like your salary and savings for the future.
The total market for the innovation is not viable.
Another danger is that once a customer has bought your product once, they might not need to purchase another one of the products again, and the likelihood of sales from that customer decrease in the following year.
This is not to say it is impossible to make money successfully in niches. Quite the opposite.
Many companies successfully innovate and develop products and services for extremely focused customer segments. However, the successful ones have figured out ways to provide and sustain value over longer periods of time. Either through a portfolio of several products which can be bought repeatedly, or through services which are required and paid for regularly.
This makes them less reliant on the success of one particular niche product.
What other existing or funny examples of innovations which may have a market which is too small can you think of? Let me know in the comments.
Latest posts by Nick Skillicorn (see all)
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- Leaders will invest less in transformational innovation due to fears over the economy - February 6, 2023
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