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Niching Your Business: Specialise to Improve Your Chance of Success!

By Anne-Marie Watson
Published September 15, 2009

An important part of any company's marketing strategy is identifying what markets they will sell to and what strategy they will approach these market(s). Three generic types of strategy options include:

º Overall cost leadership - involves manufacturing large volumes to achieve cost efficiencies that allow the business to out-compete others on cost.

  • Differentiation - requires finding a unique way of offering your customers a service or product that is considered different from others, possibly even unique.
  • Focus - involves specialising in one type of segment or customer or providing a specific product or product line only.

Niche marketing is a form of 'focus' strategy. It involves a business focussing on one or more narrow market segments instead of going for the whole market (sometimes called 'mass marketing'). Niche marketing usually results in providing a highly specialised product or service to a particular segment. An example might be a bookshop specialising only in militairy history. The segment is highly specialised as it focuses not just on history (as compared with all the other areas that bookshops can cover) but also on a specific area within history: militairy history.

This type of strategy is often the approach taken by small business as it provides several attractive benefits:

  • They can often avoid going head-to-head with major companies, because the segment is too small to be of interest to larger competitors.
  • Price competition is often lower because few if any alternatives are available to the target customers, and hence profitability can be higher.
  • Companies can often avoid the need for an extensive sales operations or distribution network.

 

Niche marketing has been adopted by many small companies which have been quite successful - some achieving meteoric business growth and iconic status in the Australian business world e.g.

  • Roses Only - an extremely successful venture that provides only roses rather than a range of flowers as done by most florists.
  • Fruit At Work – a previous winner of the Australia Post Small Business Awards, this company specialises is selling fresh fruit to companies for their employees.
  • Bridgeclimb - a visionary entrepreneur’s dream that has become the most successful tourist product exported internationally, recently voted “Export of The Year”. As the name implies, the single product they sell is the experience of climbing Sydney Harbour Bridge
  • EcoWash mobile – a waterless car cleaning franchise.
  • Peter Alexander – now a well known brand of pyjamas, which also grew strongly using its own niche distribution channel, direct mail.
  • DeBra – a retail outfit specialising in bras only
  • Remedies – a specialised merchandising system that offers a small range of medicines that are distributed through convenience stores and the route trade.

 

Concentrating on a niche market can well suit a start-up or new busines as it allows them to use their limited resources more efficiently. The key to successful niche marketing is specialization, although making your offer differentiated in a meaningful way has also been a factor in many company’s success.

 

Specialization can be done in many different ways. Companies can specialize by:

  • Size of customer – e.g. small or mid size businesses.
  • Type of customer – pharmaceuticals for specific type of disease state.
  • Type of channel – e.g. grocery, pharmacy or route trade.
  • Delivering customized solutions for each customer.
  • Focusing on low price or high quality – Franklins or David Jones.
  • Focusing on specific region or geographic area.
  • Producing a single product line or brand.

 

Some of the major factors you should assess when looking at what market segment you may want to start your business in are:

  • Is the segment large enough for your business to be viable – does it have enough unique customers?
  • Will there be enough repeat business to provide enough income (since the numbers of customers are often limited)?
  • Will the customers in this segment be able to afford your pricing as you will not be able to rely on a large volume business?
  • If the market is already crowded, will you be able to differentiate yourself sufficiently to attract enough customers to succeed?

 

While niche marketing is often acclaimed as the ‘super’ success strategy for businesses whether they are online or otherwise, make sure you do your homework first.

 

 

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