New market entrants generally have two strategies from which to select from:

1. Me-Too Strategy
2. Niche Strategy

A Me-Too Strategy comprises of acting as a market follower and imitating the Products offered by the incumbent market leaders. Me-Too Products generally have one-or-more inferior attributes when compared to the incumbent Products – if not in their Quality then perhaps in Brand perception.

A Niche Strategy comprising of developing a Product targeting a Niche Market. These Products often sacrifice many attributes common to the Category in order to satisfy the specific requirements of a smaller number of Customers.

Strange Differentiation allows inferior Products to successfully sell into Niche Markets. A Product may be objectively inferior but offer a unique variation that is valued by a small number of Customers. Niche strategies work even when the Product’s Price is high relative to the Customers Willingness To Pay (WTP) as no Competitive Product can satisfy the Customer requirements.

This Case Study provides a high-level overview of the workflow without detailed explanation. It assumes you are already somewhat familiar with KNIME and Market Simulation. If not, start by reviewing the Building Blocks and Community Nodes.

When George Jetson gets fired from Spacely Sprockets and starts selling a competing Product called “Jetson Gears”, he decides to test two strategies:

• Plan A – Me-Too Strategy: develop a Product which is similar, but inferior, to the incumbent Products.
• Plan B – Niche Strategy: develop an even worse Product but focus on a niche Customer requirement ignored by both Spacely Sprockets and Cogswell Cogs.

George Jetson discovers the Niche Strategy drives more Customer sales, Revenue, and Profitability.

The Competitors are defined in the Table Creator (#1) node. Our two incumbent Competitors are:

1. Spacely Sprockets
2. Cogswell Cogs

Both Competitors sell differentiated “Sprocket” Products that they manufacture for a Marginal Cost of $50 and sell for a Price of $150.

The Mean and Standard Deviation (SD) of the Customers Willingness To Pay (WTP) for the incumbents’ Sprockets is the same (Mean = $100 and SD = $40). So these Products are not Vertically Differentiated.

When Jetson Gears enters the Market he also manufactures for a Marginal Cost of $50 and sells for $150. But Customers place a Mean WTP on his Product at only $80 ($20 less than the incumbents).

Me-Too Results

The Me-Too Jetson Gears only manages a Market Share of 15.8%.

For Plan B, George Jetson develops a Niche Product that targets specific Customers. The Product offers an even lower overall Mean WTP of $70. But targeted Customers value the Jetson Gears Product more highly. This is simulated by increasing the Standard Deviation (SD) of the Customer WTP to $50 (above the incumbents SD of $40). 

Niche Results

The Niche Jetson Gears attracts a bigger Market Share of 20.8%.

Comparing the predicted results of the two strategies shows that the Plan B “Niche Focus” strategy drives more Market Share, more Revenue, and more Profitability than the Plan A “Me-Too” strategy.