A Niche in Time …
Entrepreneurs often strike success by creating niche markets they can serve better than existing companies. But finding that foothold can be difficult.
There are six requirements for tapping niche markets:
- Good Marketing. Be sure to examine the four Cs (customer, cost, channel and competition) along with the 3 Ps (product, price and promotions). Whether you start with a customer need or a product solution, the other elements must be analyzed to work well.
- Make Sure Customers Share Your Perceptions. The only version of "value" that matters is the customer’s. Identify your target audience; know them and their needs. Then address those critical needs with a perfect solution.
- Create Your Market. Don’t try to take market share where other companies are strongest; see what they’re overlooking and fill those needs. Think in new ways about customers’ needs, as existing companies are slower to take these approaches.
- Stand Out With Service. Invest in strong training, as customer service sets a company apart quickly in many fields; time-starved people will pay for service.
- Sell Value. Don’t try to be the ultimate low-cost provider, because someone will always be able to beat you at that sooner or later — or you’ll go out of business trying to stay on the bottom. Being a solutions provider will make the company’s services more valuable.
- Constantly Improve Standards. About one-third of buyers are motivated by what’s new — newer, better, faster, prettier, etc. List the differences between you and your competitors, determine where your weaknesses are, and improve those that matter the most to your key customers.
Finding new niches requires a focus on quality and profit. Be realistic about your services. You can’t be good at everything. Find your strengths and brainstorm how those can be used to serve the majority of your customers most effectively. And keep looking — new niches open up every six months.
Don’t overestimate your services by avoiding real research. Operating on hunches will result in unpleasant surprises. You must also hit the ground running, or others may be able to enter the market you isolated and take a chunk of business away from you.
Other pitfalls include underinvesting and underpersisting in selling your benefits to target customers. Your service isn’t different and valued until the customer is sold on it in his mind. In many cases, the need for a unique service may not be readily apparent, especially if it is ahead of the curve and anticipatory.
Be wary of competitors splitting the niche even finer and carving out a small, cherry-picked portion that weakens your own chances. And there is a concern over technology eliminating the barriers to entry, making it easier for competitors to replicate what you achieved easier after they’re made aware of the potential.
A key way to overcome these obstacles and create new niches is to bond with your current key accounts. Then as customers evolve, they won’t leave you behind serving a channel that closes up. With improving data-processing capabilities, a firm can enable more employees to give faster, more-personalized and informed service to existing accounts.
Value-added services that create synergistic, best total economics for the customer and lock out competition are tough to come by. Such services must fill a compelling need for the customer, and they should not be easily copied by the competition or stripped away by the customer, who could then shop for price. But if those needs can be identified and met, it helps a company lock in customers’ long-term business and evolve as they do.
Writer: Craig A. Shutt interviewed distribution consultant Bruce Merrifield of the Merrifield Consulting Group in Chapel Hill, N.C.