When you focus on a specific, targetable sub segment of a broader market, with its own unique demands and preferences, you are entering the realm of niches.
Finding and targeting an accessible niche within your current market, that is large enough to serve, can be a competitive advantage and a successful way to achieve faster organic growth.
By catering to the unique needs of a niche that might be overlooked, or underserved by the competitive field, you can gain faster traction, and potential loyalty with customers in the niche.
It is also an excellent way to stay out of the fray if you’re fighting for business in a market cluttered with competitors.
We’re going to cover:
- The top five benefits of entering a niche
- How to decide if a niche is pursuit worthy
- How to narrow down your niche list to those with the greatest opportunity
Top 5 Benefits of Entering a Niche Market
Identifying, evaluating, and entering a niche takes time, resources, and work.
There are many benefits that make entering and investing in a niche worthwhile. Five of the most noteworthy benefits include:
- It is generally more cost-effective to develop and market a product or service to what is most likely a smaller set of customers.
- You typically face fewer competitors. One caveat, once you lay the groundwork and prove a niche is viable, expect to see the competition heat up. Be prepared for that eventuality.
- Niches allow you to focus, provide better service, engage in targeted marketing and selling, and develop domain expertise. This creates an opportunity to own the category.
- They provide opportunities for product and service expansions with ready-made customers. An example of this is the SAP story of launching a financial accounting system in 1975 to then launching and selling invoice verification and inventory management to the same customers illustrates this benefit).
- Customers in a niche are often connected to each other, which increases the likelihood of referrals and other word of mouth efforts.
Everyone can relate to examples of niches in a consumer market, such as running shoe manufacturers who design shoes for people with high arches or flat feet. Or bakeries that make sweets and bread for gluten free customers.
If you’re wondering whether there’s money to be made with the strategy, we only need to look at Siete Foods, a family-owned business which started in 2014 with grain free tortilla chips and in 7 years reached an estimated revenue of $21 million. That’s a lot of chips. Niches offer the same benefits in business-to-business.
Is There a Viable Niche Market Worth Pursuing
For a niche to be viable there needs to be enough customers that share something in common, such as a:
- Problem or opportunity (such as shipping products from the factory to the customers receiving dock, making remote collaboration seamless)
- Value or interest (reducing the use of plastic in their products)
- Quality requirement (exceptional customer service)
- Geography/climate (preventing buildings from flooding during hurricanes or overflowing waterways)
Identifying and evaluating potential niches will require research: customer, market, ecosystem and competition. Primary and secondary research and analysis are the foundation for a customer-centric approach to growth.
The output (data and insights) can be used to perform voice of customer studies, understand supplier preferences and buying criteria, assess the value of niches, build or validate a positioning and messaging platform for the new niche, and analyze competitors and market ecosystems. Research enables you to make investment decisions more confidently and reduce risk.
How to Narrow the Niche List Down to the Best Opportunities
Once you identify niches that shares something in common that you can address with your products and/or services, your next step is to evaluate these niches and determine which are worthy of pursuit. At a minimum, a viable niche should meet the following five criteria.
- Enough customers to warrant the investment. While a few big customers might be attractive, too fewand you might find your company at risk in the future.
- Enough customers that you can profitably access. Not only do there need to be enough customers, but you also need to be able to connect with, and engage them.
- A segment that has room for growth and expansion. Will you be able to sell other products down the road to these customers? Are the customers large enough to become repeat buyers?
- Competitors. Lack of competition is not necessarily a good sign. Sometimes a blue ocean is not an ocean at all. Likewise, you don’t want to try and unseat an existing dominant player unless their performance is so poor customers are willing and ready to switch. Keep in mind, companies will often stay with a supplier they are not satisfied with, longer than you might expect, especially if the cost of switching is high.
- Customers who have the money and are willing to pay a price that makes it profitable for you. This addresses the question of whether the niche is or will be profitable.
Pursuing a niche takes all the same upstream and downstream Marketing needed to create consideration: a compelling value proposition, solid positioning and messaging, mapping the customer journey, defining personas, and developing a customer-centric strategy and plan.
If you execute well and become known as the specialist for a niche, you are on your way to being the brand and supplier of choice. As you experience business growth, you can use your niche as a stepping stone to an adjacent market or to broaden your opportunities within the niche(s) you are serving.
Many companies do not have the bandwidth to identify and quantify the opportunities and accessibility of niches. We can speed you on your way.
Laura Patterson is president and co-founder of VisionEdge Marketing, Inc., a recognized leader in enabling organizations to leverage data and analytics to facilitate marketing accountability.
Laura’s newest book, Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom: www.racombooks.com ), is a useful primer for improving marketing measurement and performance. Visit: www.visionedgemarketing.com
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