How Defining a Niche will Increase Your Bottom Line
/GUEST POST BY JORDANA RANDOLPH
Fourteen years ago I entered a highly competitive industry as a business owner-- women's handbags. I was 18 years old.
An over-saturated market and inexperience aren't exactly a combination for success. Without realizing it at the time, I made a very important decision that led to building a business that supported me for over a decade.
I defined a niche.
My handbags weren't for every woman who carried a handbag. They were specifically designed for women who knit. The exterior of the bags looked like stylish handbags while the interiors catered to knitters. Each roomy design had pockets for knitting tools and a project, avoided hardware that could damage knitwear and had a separate compartment for purse items.
My loss of every woman who wasn't a knitter as a customer, gained me a market I could compete in.
Why Your Business Needs a Niche
As business owners we tend to resist defining a niche. We know our products and services could serve a huge range of people. It seems counter-intuitive to exclude someone who could be a potential customer and miss out on a sale. Actually, targeting a specific type of customer with your marketing and product offering will often be the cause of making a sale.
The simple explanation is that when given two choices a person is going to choose the option that is most specific to addressing her needs.
Let's say you're on a road trip when you notice your brakes have started to squeak. Before they get worse and cause more damage, you need to find a mechanic to repair them. There are two shops in town for you to choose from; one has a sign out that reads, "We Can Fix Your Car" and the sign on the shop next door states, "We Only Repair Brakes." Which shop do you take your car to?
You're likely going to select the shop that only repairs brakes. Your logic tells you they know everything there is to know about brakes and repairing them. It's what they do all day, every day.
That brings us to the first reason to have a niche.
1. A niche gives you authority.
A niche makes you an expert at solving whatever problem your product addresses, and rightly so. The purpose of your business is to solve a problem or set of problems for a specific group of people. Customers will quickly recognize you as the expert and choose your product over a general product. They know it will address their specific needs.
After years of marketing my handbags to knitters, I knew the styles and design features knitters liked the most. I became a trusted expert at designing knitting bags. I had hundreds of comments from my customers-- knitters-- that supported my design decisions helped me make my products better.
2. A niche keeps you focused.
Trying new marketing strategies, product offerings, distribution and prices is part of growing your business. Trying new strategies is risky when you're trying anything and everything. With a niche your risk at trying something new is reduced. Creating a niche outlines the boundaries to make your decisions within. When you know your customer well and which of her needs you are trying to solve, it's easy to stay focused and not get distracted with strategies that aren't right for your business.
A niche also focuses your brand and keeps it consistent.
Each time an ad is placed, a social media post is created or content is written, you know exactly who you're talking to. You're not trying to solve every problem for everyone. If you did take that approach it would be overwhelming and create a chaotic brand message. It would will turn people away confused about what problem your business solves.
3. A niche reduces competition.
In theory every alternative option to your product or service is competition. As a knitting bag company, I was in competition with other knitting bag companies, handbag companies and even the companies that sell plastic bags to retailers. That's a lot of competition! By designing bags with features which would attract my specific customer, I made my competition less relevant and less of a threat. I was able to address the needs of knitters other handbag companies weren't aware of.
A defined niche will help you differentiate your products and services and standout in a crowded marketplace.
If you're able to create a product that is hugely different from your competition, it also give you the ability to set a premium price. When nothing compares to your product, price shopping isn't possible.
4. A niche helps you find customers.
The more specific your niche, the easier it can be to find your customers. Where did I look for knitters? That was easy-- yarn shops and knitting expos, websites and magazines. Where would I have looked for women who like handbags? Everywhere. My advertising budget would have quickly and ineffectively depleted as I tried to gain interest from any and every woman.
When you know your customer-- her needs, desires, where she shops, her hobbies, where she hangs out-- you'll know exactly where to find her.
Find Your Niche
Identifying your niche can be difficult. Consider the following as you define the customers your business will target.
- What group of customers isn't being served by your industry? How do their specific needs differ from those who are currently being targeted?
- Can you create a niche by combining two of your passions?
- What's unique about your product or service and what group of people benefit the most from it?
- What's another group of people, possibly less obvious, who could benefit from your product or service?
- If you're a service-based business that interacts with clients, what type of client do you enjoy working with?
- What group of customers are you currently attracting? Get to know them better to identify similarities you may not be aware of.
When You've Niche'd too Far
Opening a sandwich shops that only offers gluten-free breads could be a profitable business. In contrast, opening a Mediterranean gluten-free, vegan sandwich shop that only accepts Bitcoin, is likely setting yourself up for failure. It's niche-ing too far.
As you narrow your target, consider how large the niche is. Realize you are only going to serve a percentage of that market because everyone in your niche is not going to purchase from you. Is the niche large enough to sustain your business?
Lastly, keep in mind that although your marketing efforts exclude everyone but your niche, in most cases you don't have to turn away business. People not in your niche still can and will purchase from you.
Photo credit: Kaely Haueter
Jordana Randolph is a small business consultant. Her niche-- product-based businesses in the creative, artistic, handmade and design industries. She helps business owners reach the next stage by helping them define what success looks like for them, creating an achievable growth strategy and putting systems in place for effective execution. She offers a free 30-minute call to begin your journey to the next stage.
Website / Instagram: @JordanaRandolph
