Remember the game King of the Hill in which one player, holding the high ground, can fend off an army of challengers? That kind of positional advantage is the reason it’s hard to compete with a market leader. In established markets, leaders stake out the high ground, creating obstacles for challengers. The solution, of course, is to define your own market and become its leader.

In the 1970s, European and Japanese automakers challenged America’s "Big Three" by carving out niches within the overall market. Volkswagen was the economy car; Mercedes was the luxury car; Volvo was the safe car; BMW was the performance sedan; Porsche was the performance sports car. Over the years, some of those companies have stuck to their niches. Others—Toyota for example—have built on niche success and become leaders in the overall automotive market.

The logic is unassailable. Niche production lets you focus on high-profit products. Niche marketing lets you direct marketing efforts where they have the greatest chance of success. And with the advent of the Internet, niche selling has become easier to execute, allowing a focused seller to identify and reach customers across the globe.

It’s a strategy that works best when executed by the entire organization. Research knows where to look, product development knows what to make, marcomm knows what to say, and sales knows what and where to sell. The result is less waste, lower costs, increased sales, and higher margins.