(3 Simple Steps)
The word niche has become so cliche and widely used that new entrepreneurs either misunderstand the word, or underestimate just how important they are to effective marketing, positioning, planning and sustaining their new business idea. So let’s go through it, step by step, so you completely understand.
We’ll begin with why to choose one, then get into more specifics and then talk a bit about what it takes to win the niche-game. Don’t worry, it’s not as dense or complex as you might think. The question is how well you can harness this information and then flex your creativity muscles. Enjoy!
A niche is a focused, targetable portion of a market. It’s not the general market which consists of all consumers. A niche is a small, specific, portion of the general market. Many small business marketing strategies consist of throwing spaghetti against the wall and seeing what sticks.
They may not understand marketing, marketing trends, or advertising. So they try a little of everything and end up frustrated when they don’t get the results they expect.
This chaotic method can be extremely costly and ineffective, especially for self-employed newly registered small business owners who don’t have a huge marketing budget.
So now take a second to think about your perfect client. Right now, stop and think what they look like and don’t say…
If what you have starts with any of those, well, then you’re headed for trouble because they’re far…
You can’t be everything to all people! Here’s an easy way to remember that smaller targets are easier to hit: An archery club was practicing.
In the real world, the biggest target is easiest to hit. But the opposite is true in marketing. Large targets are difficult to hit. The more diverse group you hope to appeal to, the harder it is to catch their attention. So remember, as small businesses, smaller targets are easier to hit.
Here’s an example using a landscaper who attends a networking event hoping to connect with new customers or get referrals. They might say:
And this won’t work. Why?
You can rule your niche, but you’ll never rule the entire market.
People want to work with specialists, not generalists. They want someone with the reputation as “THEE” guy, you know? They want the best, even if they can’t afford it.
No one wants to hire someone who says “I’ll do anything for a buck!” And you don’t want to be a “Jack of all trades, master of none”. Choosing a niche helps build your reputation as a professional. You’ll become the specialist, which improves brand image. Remember, narrowing your market will increase profits and decrease competition.
You may be thinking that your profession doesn’t have any niche options. But every profession or industry can specialize in a niche. Here’s an example of a masseuse:
If you specialize…
An excellent example of specialization is Matt Horwitz of LLC University. His website is a comprehensive resource specifically for forming an LLC. That’s what he knows and sticks to!
So now it’s time to find the best niche available. If you’re an existing business, you have the option to choose a niche from your existing information. Take a look at your past and current clients.
Let’s say you’re a landscaper. From your client list, you conclude the bulk of your business comes from elderly, single women. Why this will work:
But what if you’re just starting out? I’m assuming you have some experience in your field, so you can probably make an informed decision regarding your niche. So do your homework.
Research others in your field and take a look at what they specialize in. Gather as much information as you can and choose the niche based on data and facts. Not just a gut feeling.
Although there’s no guarantee the niche you choose will be the most profitable, there are a few guidelines to remember:
Wouldn’t it be nice to find a niche no one else had? Wouldn’t it be fantastic if you had no competition? But don’t waste your time trying to find a niche with no competition. That rarely happens. Don’t be afraid of a little competition. It’s part of the business world and makes you a better business person. It makes you try a little harder to get clients and keep them happy.
Let’s say you want to open a dance school, but your area already has 4 established dance schools. Schools that have been around for a while. What does that say about your area? The market’s big enough to support 4 dance schools!
The area’s interested in dancing! Think about your area. Consider what aspect of your industry you could dominate. Check out the competition to get an understanding of what’s already available, and where you could sneak in and capture a piece of that market.
Create a plan for how to dominate – then see it through.
It’s so easy to revert to “Anyone, Someone and Everyone” when you’re desperate and struggling. But don’t make a marketing decision based on fear and stress. Breathe and focus on ONE group to begin with.
Use your marketing time, energy and budget on one niche. Remember, you can always branch out and focus on multiple niches. Start with one, and go from there.
No, you can’t. If you try to sell to everybody then you won’t engage anybody. That doesn’t mean you should forbid anybody from buying your product – who would do that? Instead, it means you need to decide who you’re targeting.
Jerry Rackley, chief analyst at marketing research and advisory firm Demand Metric Research, said, “If you can’t put your ideal customers into an identifiable segment, your business plan is a no-go,” With that he means that your market should be easy to define and therefore easy to target. After all, if you can’t figure out how to reach them how are you going to sell to them?
“Okay, I’ll Target “Hot Women” Between 18-26 Who Like Dressing Well”
Just because you need a category that’s easy to define doesn’t mean you should pick a category that everybody knows about. I mean, yes, there are ways to survive in a competitive industry, but why make life hard on yourself when you can instead search for a niche that other people don’t really know about? It’s important to be creative.
The first thing is to not run with the herd. Yes, there are some cool market-segments. The problem with those is that everybody’s going to pile into them, which will make the competition cutthroat. It’s far better to choose something less cool, but where there’s still money to be made. That’s why the garbage collecting business is such a profitable racket in so many places. Everybody thinks it’s a dirty business and therefore doesn’t want to do it!
So find your neglected market, where people have money but that everybody else is ignoring for some reason.
“Okay, Middle Aged Men Suffering from Ghost Limb Syndrome.”
Of course, you do have to make sure your market is actually large enough. After all, however lucrative the segment might be, if there are only ten people in it and you aren’t making a few hundred million per customer (like super-yachts) then it’s going to be hard to stay afloat.
You’d be surprised how many people don’t do this kind of basic market research. You need to know how to stay profitable, how many people there are in the market and if there is any risk of saturation if you do manage to get going.
If people keep dropping in and out of the market, there is no risk of saturation. If your product needs to be replaced regularly, again the risk of saturation is small. If, however, the market remains constant and your product stays useable, then you’ll end up going the way of Crocks.
“Elderly People Falling Behind Modern Technology.”
The final piece of the puzzle in this step is to ensure the market has serious growth potential. The above title certainly has that, which means that even if other people figure out your niche, you’re still in a position to grow nicely, seeing as the niche will expand.
Even better, if you become a market leader in your new niche, you can vacuum up more and more of these new customers as they enter the niche. In that case you’ll be in the enviable position of being able to suffocate new startups before they become serious competitors without running the risk of running into antitrust cases, as it’s just a niche, not the entire market.
Jack Welch famously said,
“If you don’t have a competitive advantage, don’t compete.”
And we can add,
“If you don’t protect your competitive advantage, you don’t have a competitive advantage.”
Having a competitive advantage means being able to legitimately claim, “We are the only X that does Y.” It’s not enough to be better, it’s not enough to be the best. You need to be the only one.
And no, being honest, personable, or results-oriented won’t cut it!
Ideally, you want to have a truly unique product. As in,
“We’re the only amusement park that features a fully-functional time machine”, or “We’re the only manufacturer of industrial air conditioners capable of cooling down a 10,000 square feet hall by 20 degrees in 3 minutes”, or “We’re the only restaurant that offers steaks made of real mammoth meat.”
While having a unique product or service is always best, it’s not an easy task. First, you need to come up with something truly unique. Then you need to make sure nobody copies your uniqueness, which ranges from very expensive in the best case scenario to outright impossible in the worst case scenario.
It’s not about your product or service anymore. It’s all about packaging, branding and marketing your product or service. A while ago, I saw an ad by Ford that illustrates my point perfectly. The ad closed with the following statement, “Only Ford has Ecoboost fuel economy!”
The ad never explained what Ecoboost fuel economy is or how it’s better (if at all) from all other options that exist on the market today. What matters is that only Ford has it. They’re the only car manufacturer that equips their cars with Ecoboost fuel economy. What would stop Honda from making the same claim? Turns out, Honda can’t use the word “EcoBoost”, because Ford trademarked it for automobiles and automobile engines!
Ford didn’t need to invent a revolutionary new type of engine (or even a revolutionary new fuel saving technology). All Ford needed to do was to come up with a name for whatever technology they already had and to trademark it. There are many trademarking firms in the world, but there is only one Trademark Factory®.
You get the point. Not only is trademark protection a very powerful tool for building and protecting your competitive advantage, it’s also very inexpensive.
Let’s take an example from a very competitive industry that most would consider less than very exciting—mortgage brokers. Let’s say you are a mortgage broker just like any other mortgage broker in your city. Of course, you’re honest, personable, and results-oriented. But that’s not enough to differentiate you from your competition.
But what if you could claim that you’re the only mortgage broker in the world who uses a proprietary IHNC Rate Calculator™ to determine the best mortgage rate for your clients? Much better, right? What does IHNC stand for? I Have No Clue. If you can do this with mortgage brokers, imagine what YOU can do with clever branding and packaging in YOUR new business!
About the Authors: This definitive guide to choosing a niche is a collaboration with battle tested entrepreneurs and business owners. A HUGE thanks to Norman Arvidsson, Andrei Mincov and Liesha Petrovich!