Define a Niche

Dictionary.com and other internet sources agree on the definition of a niche as a “specialized segment of the market for a particular kind of product or service.”  The concept of a niche has broad appeal as any company or professional firm providing services or products can embrace the philosophy of focusing on specific offerings intended for a well-defined target market.

Why Adopt a Narrow Approach?

Over the years business leaders have shied away from assuming a niche presence, fearing that if they only provided a limited scope of services or products they would limit the size of their potential market. The mantra was that in order to grow, it was important to cultivate the most customers. Quantity was crucial to survival.

Although on the surface this seems intuitively accurate, the reality is more likely to be that the narrower the focus, the broader the opportunities.

How can that make any sense?

Does this really mean that the more limited you are, the better your company profits? After all, one could surmise that a business with many options would attract many more customers and clients.

How Does a Niched Company Thrive?

In de-bunking the generalist approach theory at the recent Mahwah Chamber’s “Business Growth in a Digital World Conference” (#MRCCBizConf), guest speaker Joe Connolly from WBCS880 Radio, shared some keen insights on the topic.

Joe is known for his Small Business Report and the CBS-Bloomberg Business Report, two platforms that enable him to keep his finger on the pulse of the small to mid-size economic landscape here in the northeast. His insights and observations are often founded in first hand, observable behavior at the grass roots level and his practical suggestions and solutions work well for business owners across the country. 

During his remarks, Joe referenced a Wall Street Journal article published on October 4, 2018 entitled, “Why You’re Buying Products from Companies You’ve Never Heard Of,” which discusses the rapid rise of microbrands. He went on to expand on this subject, talking about the power behind the idea of microbrands - which are smaller in breadth but more efficient than the bigger, all-encompassing companies they compete against. These entrepreneurial companies are successful because they use the hyper-targeted marketing methods that enable them to get the attention of their specific audience. By delivering the products and services most valued by their customers, they build a loyal and satisfied base that is easier to retain – and through word of mouth and social media – keeps growing.    

In his blog ‘Attack of the Micro Brands,’ Scott Belsky, at Scott.Belsy.com, says this about microbrands, “No surprise, these brands are targeting by age, geography and interest among other criteria. But they’re also leveraging each other to zero in on customer preferences in a way no one else can.”  That’s an interesting idea – the words ‘in a way no one else can’ can have a deep impact on today’s competitive business environment. It sounds like a niche focus could become a business imperative in the coming years.

This Works for Consumer Driven Companies – But How About for B2B?

Whether you are a microbrand selling apparel or home goods to the millennial generation or an established law firm focusing on protecting intellectual property in an era of technology, or a financial planner helping families with special needs children, it is clear that the more you know about your customer or client, the more effectively you can provide the solutions they need.

It boils down to this: companies that have identified a specific market are more able to follow the “one-inch wide but mile deep” strategy that is the most significant for the next generation of customers/clients.

How Does a Company Build a Niche?

Any business or professional firm can leverage a niche approach. This is as true for professional firms in law, accounting, engineering, healthcare and wealth management – to name a few - as it is for corporate giant retailers like Walmart, or global companies like McDonalds and Starbucks, or consumer product providers like J&J or Coca Cola.

In every situation it is vital to understand the company’s existing clients and then determine how to best serve them while also attracting additional new business with similar characteristics.

It is difficult, if not impossible, to be everything to everyone. While ‘one-stop-shop’ sounds nice in theory, it is increasingly hard to deliver on the promise of excellence across a wide range of services and products. Walmart, for example, cannot build a relationship with a high-end customer seeking the finest designer brands.  But they can, for the most part, corner the market of working class family shoppers who survive on very limited household budgets. They are not trying to attract any customer – instead they are working diligently to attract their customer.  Likewise, McDonald’s, J&J, or Chico’s know precisely who and where their best audience is, just as most any successful company of any size does.  Analytics and key performance indicators supply the data that helps businesses maintain their niche presence.  

But the challenge is to be willing to forfeit a generalist approach in lieu of penetrating a targeted sector.  This takes time, patience and the courage to stick it out! It also requires a champion or cheerleader who is willing to advocate for the transformation and will keep the process moving forward even if it seems to falter at the start.

In the B2B world, the process is much the same as in the consumer space.

Instead of a consumer, though, the company or firm needs to have a vision of the profile of the exact audience being targeted. This knowledge is the basis for distinguishing the company amongst all others in the field.

By understanding the audience, the company can make smart decisions, quickly identify competitors, strategic partners, noncompeting vendors who serve the same audience, referral sources and other influencers, as well as trade associations and business organizations whose members are likely to be current or future clients/customers.

More importantly, by carefully selecting the demographics of the audience, the organization has a chance to learn more about their customers. In this way a company that is deeply embedded in a niche can gain a critical understanding of the distinctive challenges, issues, emerging trends, and opportunities they face.  Ultimately, the products and services delivered are more meaningful. As a result a niched company or firm may be frequently recognized as the ‘thought leader’ in the industry, developing a reputation for the value of its capabilities and unique competencies serving this community.  

Reputation Matters

The world is indeed getting flatter – and every day the playing field expands.  Once a company had to keep a watchful eye on local competitors invading their town, city or state. But that scenario is gone, replaced by global competitors who can leverage technology and the internet in order to behave as conveniently and cost effectively as the business with a presence on Main Street once did.

The consensus of current research is increasingly demonstrating that those companies and firms that commit to building a powerful reputation with an identifiable audience will have a greater chance of differentiating themselves, deeply connecting with communities of followers, and developing a major advantage by out-serving their competitors.