Finding Success In A Fractured Market

A fractured, or fragmented, market is one where there are no clear leaders in the industry. Big or small, the businesses don't lead, yet they don't follow either.

Though it's possible to operate a business this way -- people have been doing it for centuries -- there are still some major concerns, with expensive logistics and low-profit margins being the top two. So for a business to find success in a fractured market, operators need to be strategic about logistics costs, increasing sales and building brand recognition.

Am I part of a fractured market?

Examples of industries operating in a fractured market include hospitality industries, construction firms, software development, IT firms and retail and distribution companies. Still not sure if your business belongs to a fractured market? Here are other features you can use to identify your standing.

Lack of a dominant player

One of the fundamental characteristics of a fractured market is that none of the existing companies has a sizeable market share. There are no major brands in a fractured market, and customer loyalty is divided between all the players in that particular industry.

Low entry barrier

The start-up costs for most businesses in this market are low because of their size and a limited number of products or services.

Low level of innovation

Industries in a fractured market offer similar products and services. Products also get little to no significant improvements even after a long time.

Lack of real economies of scale

When there is an increase in efficiency leading to an overall decrease in production costs and a rise in output, you have economies of scale. Fractured markets don't experience this too often.

Lack of standardization

There are no protocols that govern goods or rendering services in a fractured market.

How to navigate a fractured market

There are no leading brands in a fractured market. Though you may think this is solely a disadvantage, an astute business owner can see how to take advantage of a level playing field to really stand out.

1. Identify a niche audience for your products or services

Adopting a niche strategy (focusing on a particular group of people) can be highly advantageous. First, a niche strategy divides a big market into a much smaller segment. For example, in an IT software development market, you can choose to only work with hospitals and accounting firms. Focusing on a specific type of customer allows you to understand their needs better and work on a product or service that is suitable for them.

2. Take advantage of the low entry barrier

Start-up costs in a fractured market usually are low, and the lack of major brands allows you to create a winning marketing strategy to gain a competitive advantage over other businesses in the market.

After identifying a target market, you can leverage marketing tactics such as buy-one-get-one-free deals, mobile and email marketing, word of mouth and social proof. Customers in a fractured market are more receptive to new products and services and are likely to go for the best deal.

3. Stand out from the crowd

Offer something different to an otherwise oversaturated market with the same products and services. To differentiate a product, compare your product to those that exist and improve on features, performance and quality.

If, for example, you want to open a fast-casual restaurant in a local market sprinkled with several other fast-food restaurants, cater to dietary restrictions. Having vegan menu options, for instance, will set you apart from your competition. Start with a few vegan meals, then diversify your menu depending on the customers' preferences and feedback.

4. Personalize your business brand

Branding is essential to any business' success. It should elicit the feelings you want from customers. Distinguish your business by going beyond products and services and tap into the positive emotions of your customers.

For example, if you run a mini-golf course for families, make sure your brand reflects family-friendly fun. Create a memorable logo and build associations with the image. Take out ads that show a family cheering over a hole-in-one. Show families you care about the priority of parents' needs by advertising your changing rooms, private feeding areas, or nursery services. Always keep your logo visible. The next time someone sees it, they'll know it's you.

Conclusion

The low-profit margin and lack of economies of scale that define fractured markets can be discouraging. Fortunately, with a well-researched marketing strategy, it is easy to start a business and even thrive in a fractured market.