Feel like you are not making an impression on your target market? Or are you fighting with too many competitors? If the answer to the above questions is “yes”, then I have just the marketing tool to save you from being another name in the crowd – Niche Marketing.
Niche marketing is essentially promoting your business to a specific segment of the market– the niche. For example- Vegan cookies.
Typically, cookies are made for everyone. I mean, who doesn’t like cookies? But since the market for cookies is so broad and there are so many bakeries or companies selling the same product, it can be challenging to stand out. That is exactly where niche marketing comes in. By focusing on a specific segment of the total addressable market (in this case vegans) and by tailoring the product to fit their tastes, businesses can create a sub-market for themselves with fewer competitors.
Another great example of niche marketing is Whole Foods. I bet you can not count the number of grocery and general stores all over your locality. There is at least one general store in every area. In such a saturated market, it is tough to create a brand. So whole foods found a way to bypass the overly saturated grocery market by identifying a niche or subgroup within the market- health-conscious consumers wanting natural and organic food products.
So they built their grocery store with a focus on offering organic and natural products and by doing so created a very targeted value proposition towards the health-conscious subgroup of the market. This helped them create a brand much more easily because they did not have to compete with thousands of grocery stores offering the same undifferentiated products.
By ensuring high-quality customer service and products targeted to a very particular segment of an under-served market, Whole Foods has been able to create high brand equity.
Another example is the iPhone. With superior product quality and best features, iPhone can charge a premium price for the phones because it caters to the “brand conscious” segment of the market, looking for a phone which will commensurate with their status quo.
The same can be said for all luxury products like watches by Patek Philippe, Honestly, the core product is the same as any other watch. But by attaching a luxury aura to the product and understanding that the richest of the rich want a watch. Which speaks of their status. Patek Philippe has managed to tailor-make their watches fit the need of this segment.
The following are some examples of good niche marketing!
- Coke zero- by targeting the health-conscious subgroup of the population, coke zero expanded its market.
- Siberian Husky Kennel Bangladesh- this is basically a dream place for dog lovers and is one of a kind venture in Bangladesh. A perfect example of catering to an under served niche.
- Lean Nation Eats- provides customized delicious balanced meals for weight loss prepared by food and culinary experts.
- Eco-friendly products like bags made of sugarcane- targets the environmentally conscious people and gives the business a green image
- Cruelty-free cosmetics – many makeup brands use their “no testing on animals” policy to create a special bond with consumers looking for ethically made products and differentiate them from the other cosmetic companies in the market.
- BTS merchandise- whether you are a BTS fan or not, you can not deny their sheer popularity. BTS keychains, mobile phone covers are perfect examples of milking a profitable fanatic.
Now I know what you might be thinking- “But by narrowing my market am I not losing out on potential sales and profit?”
Well, no and here is why niche marketing is so great!
- When you narrow down your target market, it also means that you are decreasing the number of competitors in your immediate business environment. Think about it… which number is greater. The number of bakeries selling regular cookies or the number of bakeries selling vegan cookies?
Of course, there are many more regular cookie sellers than vegan cookie sellers which is exactly why making a sale in the vegan cookie market is much easier simply because the customer has fewer choices to select from.
- When you are selling a product that fits the unique needs of a consumer segment, you can charge a higher price for the product than the price charged for a product produced for all.
If I am a consumer with a unique need, I will be willing to pay more for a product specifically tailored to my needs.
This is exactly why a box of regular chocolate chip cookies costs around $10 while a box of vegan chocolate chip cookies costs $30.
Just by fine-tuning your product to fit the unique needs of a sub-segment you can charge 3 times more for the commodity!
- The third reason why niche marketing is so great and actually a profit enhancer is because of targeting. When promoting your products through digital marketing, the bigger the target audience, the greater the costs of promotion. But with a more defined niche, we can define our customers better and not only lower promotion costs but also generate more leads.
- By catering to a niche you get to understand the needs and preferences of the segment better and over time you can develop new products that serve the segment even better and in this way you have a strong foothold in that market.
- Lastly, remember “A product for all is a product for none”. If you are selling a generic product with no differentiation and catering to the entire market, chances are you will not be able to do a very good job. This is because even within a big market, consumers have a wide variation in their tastes, preferences, and needs- all of which can not be captured with one single product. This is why you must segment and choose one consumer group to start your journey to building a world-class brand.
Even Amazon, a company selling everything and catering to every niche you can possibly think of, did not start out that way. Amazon started off as an online bookstore and expanded it slowly as it started to understand the consumers better.
Having a product that fits everyone is probably not the right step for a new business. Indeed to become the next Amazon, my advice would be to start off small with a product or service that fits a particular niche market, and then build your company from there.
So it’s very clear that your profit margin will not decrease, rather it will increase due to niche marketing. The benefits gained from the fewer competition, lower promotion costs and higher product prices greatly outweigh the decrease in the total addressable market.
Furthermore, the business acumen gained from understanding the needs of one segment fully will lead to the creation of more products and services.
So yeah niche marketing is great!
Now, that I have sold you on the concept of niche marketing, let’s iterate the competitive strategic positions you can take to win in this market!
Remember we have to fight off fewer competitors in a niche market but that does not mean there aren’t any competitors!
So you still have to carve out your strategic position and competitive strategy to differentiate yourself from other brands competing in the same niche.
- Cost leadership- here you try to stand out in your niche by offering the lowest price for a given quality of a product.
Going back to our vegan cookie example- you can follow a low-cost strategy by offering the cookies at $28 whereas all your competitors are charging $30 and above.
This gives your brand a cost advantage among other brands in the market.
- Differentiation- here you will compete based on some unique capability- it can be superior customer service, product features, etc and your products will be targeted towards a specific niche.
Whole Foods follows this focused differentiation strategy.
By selling organic products of the highest quality they are catering to the health-conscious segment of the market and are competing with competitors on the basis of quality.
- Best cost provider- this is a middle ground between cost leadership and differentiation. Here you will try to provide the best of both worlds.
I think Netflix fits this band perfectly. By providing video streaming of optimum quality at highly competitive prices, Netflix has made quite a name for itself among millennials.
So these are the different ways you can compete in your chosen niche. The strategy which fits you best depends on your core competencies and ability to sustain the competitive position.
If you can source raw materials at a cheaper price compared to your competitors, maybe from overseas and have a very lean production system with minimum inventory buildup and low wastage and can continue doing so in the future- cost leadership is just perfect for you!
On the other hand, if you want to focus on high product quality and have superior customer service capabilities you should opt for a differentiation strategy.
A word of caution- when selecting your competitive strategy do select a feature that your target audience values. There is no point in offering superior customer service if your consumers do not care much for it but are rather affected more by price movements. In such a scenario cost leadership is the right way to go.
It is all about knowing your competencies and how best to match those with your chosen niche!
Now you must be thinking- “This is a great concept. How do I find a niche for my business?’
Let’s answer that now!
Finding your niche is not an overnight thing. It takes work and time to find a profitable niche.
But here are some tips to ease the process!
- Find your strengths- you must have a very thorough and accurate assessment of your competencies, strengths, and passion first.
Knowing your brand and your capabilities are the key to greatness!
Ask yourself these questions-
“What product categories interest me”
“What am I good at”
“What feature of my product do people like the most”
“What is a problem I can solve with my skills”
You have to find the intersection between knowledge, interest and profit and voila you have a starting point.
- Find a niche where you can utilize the strengths identified in step 1.
For example, you know you are very good at digital marketing and particularly interested in marketing for restaurants. You should do a thorough scan of the restaurant marketing scene in your region, find out who the competitors are and the profitability of the segment.
Start by doing market research. Check what comes up when you search your niche on google. How many competitors are there? What is the profitability like? Is there really a market for your product or service?
- Understanding your chosen niche- your value proposition must be well aligned with the needs of your niche.
If you are offering something which your niche does not value, then you will not be successful with niche marketing.
Ask yourself these questions.
“What are the psychographics of my target market”
“What are their unique needs and wants”
“How many other businesses are catering to that same market”
“Is there any gap in their offering”
“Can I add something with my skills and products”
- Craft your competitive strategy- you can choose to be a cost leader, differentiator or a best-cost provider. It all depends on matching your skills with the requirements of the market.
- Keep testing- once you are done picking your niche, you must test your idea. Start with small pilot projects if you have capital constraints.
Remember that the process does not stop once you have identified your niche and started your business. Regular monitoring and a constant feedback loop are required to constantly keep the product and service updated for niche marketing to be successful!
So that is it!
Hey, It’s Your Turn!
Let me know if you excited to try this in your business or if you already implement it.
Which one do you think is the best example of niche marketing done by a Bangladeshi company?
Please leave a comment below to let me and the other readers know your thoughts!