With the numerous demands placed on a small business owner, one cannot be an expert on everything. Thus, by selecting one, two or three relatively specific markets, or niches, you can capture greater market share and increase revenue per customer by becoming an expert in a few select areas. Fortunately, this marketing strategy applies to both new and existing businesses.
There are significant advantages for small businesses by identifying and then targeting niche markets. First, you will save time and effort by reducing the amount of information you must acquire and master, such as legal issues, technical changes and improvements and competition. Second, you will reduce costs in various ways. You can purchase fewer subscriptions, join fewer networking organizations and lower advertising costs. As you study your markets, you will spend less on traditional advertising compared to a generalist as you discover who are and how to reach your customers.
Third, from a marketing perspective, it should take less effort to refine your marketing message (promotion) and position your services and products (price, place/distribution and product) as marketing efforts become more efficient and effective. As your competence increases, the overall quality of your services and products improve, followed by positive gains in revenue and profit. Over the long term, you may be able to add new revenue streams as an expert speaker, seminar presenter and author. Furthermore, you may have greater flexibility in choosing your projects.
Realistically, one cost that will likely not change is market research expenditures as your business needs to maintain in-depth knowledge about your niche market’s needs and wants. At a minimum, research should focus on the traditional marketing mix issues – how to price, distribute and promote your products or services. But hopefully, by studying your specialty markets, it should become easier to customize and differentiate your service and products. And with in-depth knowledge, you are again the expert who should be able to outshine your competition.
If your small business targets consumers, variables that can narrow down your niche markets include some of the following. Geographically, you may focus on a certain part of the metropolitan area, state or country. One example is an engineering firm focusing on cities west of DFW Airport. Demographically, your business may choose to focus on lifecycle stages, gender or income. A prime example is an attorney specializing in divorce or adoption. A third segmentation is psychographic which involves segmenting consumers based on psychological or personality traits, lifestyles or values. An example is a fashion store targeting consumers who make frequent purchases based on the latest fashion trends. A fourth variable within the consumer market is based on purchaser behavior in terms of their knowledge or attitude toward specific products or services. Some behavior factors include how purchase decisions are made, when products are purchased or consumed, or benefits received by purchasing a certain product or service. An example is a travel agency specializing in international vacations for frequent travelers.
There are also ways to segment the business market that will help a small business identify its best niche(s). Some client criteria to consider include company size, purchasing decisions based on service or price, small versus large orders, and companies with values similar to yours. Two examples of niche business markets include accountants focusing on health care professionals and insurance agents specializing in non-profits.
Briefly, the process to develop a niche marketing strategy entails studying your business’ strengths, identifying market segments that benefit from your products or services, and developing strategies to reach them based on identified characteristics.
For more information about niche marketing strategies, contact KGB Strategic Marketing Solutions