Determining Your Market Niche

We are cooperatives out there -- that much we know. But what does that mean as far as your store's niche in a marketplace of food stores? "Co-op" can and has at any given time served many different markets.

Further, "co-op" in itself describes a market -- a consumer- (or worker-) owned store where the member shoppers (or workers under worker ownership) have a voice in how the store will present itself, its structure, product line, prices and member participation. But in the past few years, being a co-op has not been a sufficient niche in the marketplace to spell success.

Competition for market share in natural foods is being felt on all sides. These competitive pressures have eroded coops' market share substantially. Why? Because entrepreneurs -- many with co-op backgrounds -- have been able to do a better job at what co-ops started out to do. They have presented successful stores with solid vision and a grasp of what their niche is in the marketplace. They have formulated their market strategies to focus on specific goals in regard to product orientation, service, format, and customer demographics, and have done extensive research to determine their niche.

Many co-ops still have not decided what their marketing position is or should be: Are we a natural foods store? Are we serving all of the community as a co-op? Are we the lowest priced? These are questions co-ops must ask themselves, and apply research to in order to get the answers.

How do you determine what your market niche is? For starters, there are two excellent tools available for gathering information to determine your market niche or strategy. These are in-store surveys and an extensive competitor analysis.

In-store survey

A professionally prepared and administered in-store survey can reveal a great amount of information about your store and customer base. It is essential that the survey be prepared in a way that elicits information that is usable.

A typical questionnaire contains no more than 25 questions, with 15-20 being the most reasonable range. The questions asked should deal with the age and sex of shopper, time of day, and amount spent per week in your store as a percentage of total groceries bought during the week. The survey should also address where the customer does her/his largest percentage of shopping; which competitors are used for which product categories; what they buy exclusively at your store; frequency of visits to the store; and distance travelled to your store.

The questionnaire needs to be formatted so that statistical data can be derived, rather than collecting written opinions. To achieve this, questions need to be structured so as to offer choices. The interviewing should take place over a 3-day period at different times, in order to reach a broad sample of shoppers. It is important that the interviewer doesn't lead the customers in their answers. Having a volunteer member rather than a staff member conducting the interview helps with this problem. The goal is to get 300 samples, although for a smaller store 150-200 is acceptable.

The principal drawback to an in-store interview is that the results usually are more favorable to your store than those from a survey carried out elsewhere. There are two primary reasons for this: 1) you are interviewing only your customers; 2) customers do not want to offend by being too critical when they are in your store. Despite this, the in-store survey is still the best vehicle for gathering useful information about your customers and your competition.

Competitor analysis

The second useful tool is a detailed analysis of your competition. Your key competitors will be identified by your instore survey. Visit all the stores in your area, analyzing them for their impact on your store. The goal is to evaluate each store for its strengths and weaknesses that can be worked to your advantage.

In doing a store evaluation, once again it is important to use a simple form that produces useful information. The form should include location and parking data (number of spaces). Also: detailed department evaluations -- produce, meat, grocer, etc. -- that include sq. ft. per department and sq. ft. allocated to each department as a % of total store; pricing; display; sales activities; etc. The evaluation should also include a store summary which includes store format, highlights, unique services, and your perception of the store's impact on your strengths and weaknesses.

These two tools -- the in-store survey and competitor analysis -- once collected and computer compiled, will provide you the information needed to identify how your co-op fits into the market and how it is perceived by the customer base.

The next step is to decide if that's where the co-op should fit in and if it matches the perception or plan of board and staff. Secondly, the information obtained from the surveys provides you the opportunity to change your market strategy to better fill a niche not filled in your market or one that better fits the co-op's goals and objectives as a food store.

This information should be used at the board level to set strategic planning in motion and also at the staff level to write detailed marketing and advertising strategies that reflect the strategic plan.

To be successful business enterprises in the future, co-ops need to identify what type of food store they are and what their customer base is, and concentrate on being the best at servicing their market. Co-ops, like any other food store, cannot serve all demographic and psychographic profiles. Co-ops do have something special to offer in consumer ownership and participation, but they also must be as good if not better in the business of selling food in their marketplace.

See other articles from this issue: #005 June - July - 1986