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What is a Niche?
Is Apple doomed to niches?

By: Brian Miller

The latest declaration being bandied about by the press is that the Macintosh is "doomed" to "niche status."

As a marketing guy, I am normally amused by these sorts of declarations (and the fact that they're cast in a negative light). In order to help dispel the gaseous clouds of cross-platform ignorance, I figured I'd explain the marketing process to "niche" screamers (and any press members who may be reading).

Marketing is not, as many claim, the art of lying to people to get them to purchase product. Rather, marketing is the identification and fulfillment of consumer desires. Advertising is only part of the marketing process -- in a product environment, it also includes research/development, manufacturing, delivery, sales, and post-sales service. Marketing is perhaps the broadest doctrine in business, since it focuses on the entire process relative to the consumer, and attempts to exceed customer expectations at Every step.

Marketers segment the market into various "segments" based upon demographics, usage, financial power, needs, and desires. These segments or "niches" are then targeted via a specific product. For example, Chrysler sells both the Dodge Stratus (a compact sedan) and the Dodge Durango (a large sport utility vehicle). In the Stratus' case, the company targets individuals with families (hence, four doors are necessary), seeking a balance between fuel economy and power (hence the availability of three engines and two transmissions) and good handling. In the Durango's case, Chrysler targets upper-middle-class individuals interested in family trucking (hence four doors and seven-passenger seating), and power (hence an eight-cylinder engine option).

By targeting these segments with an appropriate product, which meets consumer needs, Chrysler gains competitive advantage in each segment. A strategy which embraces targeting Durangos at Honda Accord buyers and Stratuses (Strati?) at Ford Expedition buyers would be a recipe for failure, since neither product meets that segment's needs.

Let's now move to those bundles of plastic and silicon known as computers. Within the general consumer computing populace (which purchases computers mainly for the video game capabilities), is a Mac the best choice? Let's segment the market. Profile your average computer buyer -- who wants the ability to type letters, and have his kids be able to play Doom, Tomb Raider, and numerous other vid-game titles. A Wintel box is actually BETTER for this segment than a Macintosh. It's also a VERY low-margin product. This under-$1000 segment represents 40% of box sale volume (but a much smaller dollar share [% of total dollar volume]).

Now, switch gears to a regional full-color monthly magazine, seeking a publishing work-flow solution at competitive price, with low maintenance. Higher-end Macintosh systems easily win out here, where margins are considerably higher, while box volume share is lower (but dollar share is much higher!)

"But Microsoft isn't targeting," I hear you protest. "They have a Windows EVERYWHERE policy."

To an extent, this is true -- but in markets where Microsoft has positioned itself successfully (menial office tasks, video games), it has CUSTOMIZED its Windows products to accomodate that segment (witness the confusion that the three-way-Windows strategy; NT, CE, and 9x; has caused, as well as game technologies like DirectX). In areas where Microsoft isn't doing well (creative applications, publishing, web development), it's because Windows isn't a viable solution within that market segment. (Remember Bill Gates' Seybold presentation, where he expected oohs and ahhhs when he demonstrated Windows NT 5's future ability to easily recognize a scanner [something the Mac's done since '87 or so?]) While the PC press embraces the notion that Everyone in the future will use Windows, it ignores the needs of each individual segment.

It also declares that since Apple lacks massive marketshare within the sub-$1000 area, that the company is "doomed." While I'm certain Apple is capable of (and will be) growing its share of this market in the future, shouldn't they concentrate on maintaining core markets and growing share within higher-end markets, which are higher-margin to begin with? With open standards in data transaction, cross-platform MS Office compatibility, and leading development tools for Internet and Intranet development being Mac-first (or Mac-only), why should Apple (or Mac users) be "concerned"? Market volume share per box is, as usual, only part of the picture. Essentially, Apple has a choice between doing very well at a job paying $80,000 per year, or doing "well-enough" moonlighting at four jobs paying $20,000 per year. Which would you choose, and which would be a better path to financial success?

If you encounter a client (or boss, or IS director) who objects to your use of a Macintosh (or other non-Windows product) within small business, creative, publishing, or PR/marketing-oriented use, based upon marketshare, ask him or her whether you're going to be playing video games (probably not on company time), writing letters to Aunt Gertrude (likely not), or creating complex SQL databases (nope). After eliminating those segments, look at the marketshare numbers -- Macintosh was basically created for your usage in this area! Finally, point out that Apple's dollar share of the market (the percentage of dollars of equipment sold vs. total dollar sales volume) is considerably higher than many firms above it in box volume (Apple's average dollar sales per unit are about $2400, versus about $1,200 for the average Top-10 Wintel vendor). You'll likely get your Macintosh, and educate your superior to boot!

Created: 02/04/98
Updated: 11/09/02

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