Tired of Competing Part 2: Niching
There are many pundits telling us to become unique, to find our ‘niche of one’, to become the only choice for our customers.
But still, the thought of building this private micro-market makes many of us nervous. It seems counter-intuitive; after all, logic suggests we should keep our prospect pool as wide as possible, so we have room to grow and a steady stream of opportunities to explore.
There’s an element of truth to this, of course, but it works both ways: by pitching to ‘everyone,’ you’re also competing against everyone. Every business doing the same or vaguely similar to you. And there’s always someone, somewhere with more… je ne sais quoi… than you, or someone who is prepared to undercut you and win that elusive deal.
Maybe by niching, it’s possible to sidestep this destructive bun fight?
So, what does it mean to niche down?
Whilst a generalist operator works within a broad area of a market, to target a large (sometimes huge) customer demographic, with a wide range of products and services, a niche operator does the opposite. They work within a tight and well-defined marketspace and focus on its very specific needs.
Doing so has some distinct benefits. It can be more cost-effective, for example, as it enables a business to deeply personalise its messaging to target the right people, in the right place, in the right way, and so increase the ROI of its marketing efforts. It also makes it easier to develop services or stock products that will appeal to its consumer base and actually sell.
You can imagine the branding power potential, of a firm of innovative accountants who only service funky like-minded millennials, with slick branding, youthful attitudes, and tech-enabled solutions. (Yes, you’ll have picked up there’s also an air of slightly uncomfortable generalisations that sometimes comes with niching – more on this below!).
Niching also brings clarity and benefits to customers, by reducing the number of options required to meet their needs, which in turn simplifies decision making and avoids choice overload.
But to manifest these benefits and make any success of niching, you have to know your market (aka you have to do your research). You won’t get far if all you do is set up shop in an area no one yet occupies and hope customers come through the door for novelty value. To work, niching needs to:
- Correlate with your values: To find the right niche and who you will target within it, you must do your research, but this should not be done in a vacuum. You need to consider how niching down will align with your business’s core values and how it will move you closer to achieving your goals. It has to mean something.
- Solve a problem: You also need to nail down your why. It’s not enough to hope there’s some crossover between what you want to offer and what your prospects need, you should identify it. What are their pain points – do they feel under-served or misunderstood? Ideally, you want to position yourself as an expert at solving these problems. Be the go-to person for a solution and not just another business trying to sell them something.
- Work financially: With a smaller target market you’ll need to pay close attention to the numbers to make sure you can sustain the business and turn a profit. It is worth considering whether you could charge more based on the niche attraction or by leveraging your reputation or expertise.
As with any strategy or approach, there’s a certain degree of risk in niching down, and sometimes it simply doesn’t work. Here are some common pitfalls that could see your plans unravel:
- The niche is too narrow: There aren’t enough prospective clients to make the business model work without inflating rates beyond the acceptable, to offset low uptake.
- People don’t value the specialism, it’s just an artificial construct: Would you buy windscreen cleaner that’s specially branded for your car? Probably not. There are times when a generalist solution is all a customer needs and they are unwilling to consider, and certainly not pay a premium for, anything else.
- The niche is already well covered: You can’t just decide to become better than [insert name of your huge existing competitor here] unless you have something unique to offer to make you distinct from the incumbents. As an established business they already have a proven business model, cashflow, critical mass and momentum enough to see off most new threats. You have to find a way to catch them napping.
- You don’t have the specialist skills or experience to pull it off: You may have found a wonderful niche and one that’s pretty lucrative too, but unless you have the credentials to support and underpin the venture, it is unlikely to take off.
- The niche is all about you: No one cares (sorry) if you’re the youngest or oldest accountant in your area or the only florist in town with a horticultural degree. Instead, customers only care about what you can do for them. However, if your credentials mean your produce, products or services are better, more innovative or long-lasting, then that’s something you could make a reputation out of.
- You can’t adapt to change: A narrow niche can’t provide the same level of cushion against change that a broader market can, which means it must always be monitored. I’ve seen businesses wiped out overnight by one subtle alteration to the budget tax rules or a shift in the algorithm or API on a social network.
- Your niche definition is flawed: Usually because it’s based on loose generalisations, assumptions and preconceptions about your audience and their needs. This is a very easy trap to fall into, especially when your target audience is intended to be people like yourself. Without undertaking objective research into the needs and behaviours of your target audience you risk misunderstanding them and wasting your efforts. Sometimes this is simply mis-pitching, sometimes it can come across as offensive or patronising (think Coke’s cringeworthy “It’s good, no?" trying-too-hard-for-the-kids tagline, or the ridicule BIC faced when they announced their ‘comfortable’ pink pens for women range).
Is niching the best (or only) way of breaking out of your ‘tired of competing’ malaise? Well, clearly not always.
Yes, niching has many benefits, and the possibility of fewer rivals certainly has its appeal, but for some businesses, the model just isn’t right. So what are our other options? Well, next post we’ll talk about something that could prove a better fit.