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Secret of the Niche

Kevin F. Gallagher
  • Innovation is about bringing new ideas to fruition in the marketplace and commercializing them.
  • Today’s marketplace landscape is user-defined and far more diverse; consumers now look for ideas on their own terms.
  • Sometimes a new niche starts with an analysis of the market and other times it begins with a technological breakthrough.

Have you ever wondered about the role that an ingredient supplier can play in the creation of successful, innovative beauty and personal care products? If you have, then you might find this article interesting. If you haven’t, then you might even be in for a little surprise. The aim of this article is to try to explain the role of an ingredient supplier, using Croda as an example, in helping brand owners exploit opportunities.

The best place to begin the description is not with the ingredient supplier, of course, but with the wants and needs of the consumers and how they are being satisfied in a different way in today’s marketplace. Beginning here also generates a discussion about innovation. We know that success doesn’t come from just improving on existing ideas, it comes from innovating new ones. Henry Ford famously said that if he asked his customers what they wanted, they would have told him a faster horse. This is more than just an entertaining phrase—it provides some insight into the limits of focus groups and market surveys.

Innovation is not just about creativity and invention, although these concepts are clearly linked through innovation. Innovation is about bringing new ideas to fruition in the marketplace and commercializing them. That’s one vital reason why we need to begin with consumer wants and needs. A great invention may represent some pinnacle of technical creativity, but if it doesn’t help satisfy a consumer want or need, it isn’t going to lead to innovation.

So, what is it that is known about the role of innovation in successful product development? Well, its known that the innovation of new and “cool” ideas can form the basis of customer loyalty (think Apple). How does this relate to “niche markets?” Well, one way to describe the “niche” in “niche marketing” is to define niche to mean “your specialty.” The niche is all about how you can provide your consumers with what they want. This can be beautifully illustrated if we think of ourselves, industry suppliers and brand owners, as consumers. When you have the reaction, “Wow, this product sounds like it was made just for me,” that’s when you open up your wallet.

If this “wow” factor represents what we need to achieve in consumer response, how do we get there and how is that path changing in today’s world? We know that the world of information is changing around us everyday. Today’s marketplace landscape is user-defined and far more diverse than we could have imagined in the past. Consumers now look for ideas on their own terms. Examples include: the Internet, blogs and an extensive list of media channels. And there are countless product choices being nearly drowned by too much similarity and noise.

My favorite example is television. Can you remember the days when you all watched the same TV shows and then talked about them the next day at school or at work? Like many Americans, my cable television choices include more than 1,000 channels. Remember the “early days” of cable TV, when you could surf with the remote control through your options, one channel at a time? Well, with the number of channels available today, those early days of cable seem like a wistful memory. Now, I need to surf the channels one page at a time to find the small handful of channels that I’m likely to watch. This is an example of how diversity leads to a user-defined approach.

Amid this media diversity and the countless product choices, how does the consumer seek a path forward? It’s believed that the consumer comes back to a defining question, “Is this product designed with me in mind?” This is the ultimate WIFM (“What’s in it for me?”) question. If we get this answer right, then we’re back to the answer we seek, “Wow, this product sounds like it was made just for me!” I don’t know about you, but when this happens to me, this is when I take out my wallet.

So, how do we get this answer right? How do we “win” in this game? Experience has taught us to believe that the secret to winning is in finding the right product for the consumers’ views of themselves. That may sound deceptively easy, but the reality is that your new successful product needs to be: unique and interesting, exciting and emotionally gratifying, and it also needs to perform. In short, your new successful product needs to create a new niche!

The experience at Croda has led us to evolve our business model in order to adapt to the changing world around us. We’ve synthesized an approach based on our understanding of the dynamics of the marketplace and our knowledge of ingredient performance. This includes an understanding of the structure function relationships among a variety of chemical and biochemical entities. Our business model is dedicated to providing unique, exciting and specialized solutions, based on proven technology and backed by tested performance claims that lead to market success.

Catalysts: Quest for Technology and Serving Consumer Needs

We view our role in successful new product development as acting as catalysts for helping brand owners find the next niche. This depends on our ability to be able to help in the new product development process in a variety of ways. We’ve learned to be flexible and respond to not only our customer’s needs but also the needs of the consumer and the marketplace. We can help our customers take advantage of different kinds of opportunities, depending on their own strengths as well as opportunities presented by changes in the dynamics of the market.

Sometimes a new niche starts with an analysis of the market and other times it begins with a technological breakthrough that leads us to help define a new performance claim that we believe will resonate with consumers. Along the way, we’ve discovered that we need to better understand the consumer goods market and, at the same time, be willing to make the investments required in science and technology to be able to identify and measure new performance claims. This means that we have developed, in addition to ingredient technology, substantial performance claim expertise to serve our customers and ultimately the consumer’s needs.

We can mention a couple of examples that illustrate these points. In our research efforts on hair conditioning, we discovered that a new class of conditioning agents can be made that are substantially more hydrophobic (water repelling) than the previous generation of these ingredients. Since effective hair conditioning depends on depositing a water repellant substance on the hair, we believed that we were on track to develop a generation of ingredients with enhanced conditioning and performance properties. Since this water repellant behavior also made these ingredients less irritating, we thought that we could expand the use of this chemistry into skin care products where it had not previously been exploited.

We designed a conditioning agent based on optimizing this water repellant behavior. When we developed the ingredient Incroquat Behenyl TMS (Behenyl Trimonium Methosulfate), we discovered that it could significantly improve the wet combing and detangling properties of the hair. We first discovered this using instrumental measurements; then we were able to confirm these results using consumer studies in our hair salon. We were able to develop a dramatically strong correlation between the instrumental and subjective studies. We found that the “total work of wet combing” correlated very well with the subjective salon evaluation of “wet combing” and that the “peak combing force” had a very high correlation with “detangling” evaluations in the salon. By working closely with our customers, we were able to help them create the new “detangling conditioners” niche that has resulted in a segment of the conditioner market that now accounts for more than $100 million in retail sales. This also proves that niche doesn’t have to be small.

In a similar fashion, Croda’s Sederma division was able to take advantage of new discoveries in wound healing and skin regeneration to help introduce anti-aging peptides as important ingredients in personal and beauty care. These peptides are modeled on the important “messenger molecules” that the skin releases as a trigger for the skin to repair itself (Sederma US Patent 6,620,419).

Our extensive clinical studies of these peptides indicated that they have been able to make reality of the promise of “younger looking skin” with fewer “visible signs of aging”. These anti-aging peptides now represent the key ingredients in a variety of anti-aging products that have helped revolutionize the skin care market. One of the most important aspects of this particular revolution has been to bring true anti-aging technology to the supermarket shelves. No longer is true anti-aging, anti-wrinkling performance the exclusive property of the purchasers of luxury goods, as it’s now available to mass market consumers at an affordable price.

Of course, we haven’t stopped with these important marketplace breakthroughs. We continue our work, in close cooperation and partnership with our customers to find ways to help them to identify and exploit new market niche opportunities. We view every day as a new challenge to existing ingredients and existing products. Every day brings new opportunities for innovation. We believe that our vital job, our niche in the ingredient marketplace, is in helping consumer product companies find their next niche and achieve the “wow” factor with consumers.


A word of thanks for the important contributions of Allan Gorman (BrandSpa) and Cara Eaton in the development of this article. In addition, these successful innovations would not have been possible without the technological breakthroughs of Tim Gao, PhD; Karl Lintner, PhD; Abel Pereira; and a talented team of technical, marketing and sales professionals.

Kevin Gallagher is the president of Croda Inc. In this capacity, he is fully responsible for Croda’s businesses in the U.S. and Canada, which comprise one of Croda International Plc’s major manufacturing divisions and centers of excellence for innovative new product development. Gallagher also serves as president of Sederma Inc. As such, he is responsible for coordinating and integrating marketing activities, and facilitating new product development for this leading-edge bioactive ingredient subsidiary.

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