What is your Niche?
Large businesses can afford to have a broad customer base and appeal to a wide range of markets. Small businesses can’t.
They must take a narrow view of the market-they must have a niche.
What is a niche and why is it important for small businesses?
A niche is a small segment of a larger market that has characteristics that allow the small business to operate profitably. The emphasis is on profit and not sales or size. Market share doesn’t matter. All successful small businesses operate in a niche. Many design their business and marketing strategy to fit this niche from the beginning. Others seize opportunities in areas in which they didn’t start but found success by filling a different need. Some fall into a rewarding niche by being at the right place at the right time or just good fortune.
All niches are based on some sort of specialization. You must separate yourself from the rest of the pack.. You must offer something unique. The difficulty is balancing specialization with profitability.
For example you may find a unique niche such as curling irons for left-handed red-heads. However, this niche is probably not big enough. Also how do you target this customer group? Is there a left-handed red-head society or publication?
There are thousands of niches. Niches must offer something special that a large enough group of customers want or need. This niche could be, for example, based on speed. Perhaps you are faster than the competition. You could offer a more personalized product or service, one that is more customized to the needs of you niche market. Maybe you have a unique design or feature. You could save people time or teach a skill. Perhaps your packaging is different and offers value. There are lots of ways to offer extra service and create a niche.
You basically become a specialist in the market of generalists.
Because of this specialty, you can frequently charge a premium. You get to know your customers so well that your niche allows you to always meet and usually exceed their needs. Your uniqueness offers value and people will pay for this.
In creating your niche, you separate yourself from the rest of the competition. You create loyal customers and we like loyal customers. Niches can shield you from bigger competition by being too small for them to bother with. You can find a niche by examining what your competition doesn’t do well. Remember, though, a small niche market must be big enough to be profitable-not necessarily big, but big enough.
Niches have another advantage in that they can lower your costs. Once you have found your smaller segmented market which you are targeting, you can pinpoint your advertising and promotion programs. This applies whether it’s a direct-mail, media, or other marketing efforts. Because you’re more targeted, your response rates are better, lowering your cost per sale. Operational cost may also be lower through specialization.
Expanding can work but you must be careful to stay within your niche. Look to grow your business within your niche by responding to change. You can do this by adding new markets to your existing products (or services) or adding new products to your existing markets. Large companies often seek out diversification but diversification and small business usually are not compatible. They get you out of your niche. You end up diluting your efforts with separate markets and separate products. Costs go up and specialization goes down. Good-bye niche.
Develop and grow your niche and then structure your marketing strategy around it. Chances for success will improve.
This article was written by Seattle SCORE Chapter member Fred Parkinson for the Kitsap Sun in Bremerton.