Niche marketing: Beat the world’s Walmarts and Air Canadas by targeting your small businesses
Being indispensable to a select group of customers can be good for business – especially when larger competitors are breathing down your neck.
A focused niche market allows small businesses to get really good at offering one thing or serving one particular type of customer. And that’s something big businesses can’t do. By definition, their success often depends on trying to be all things to all people.
Walmart, for example, sells everything under the sun. From its pharmacy to its photo lab, the empire was built by offering one-stop convenience to budget-conscious customers. In addition to their dizzying array of products and services, the company is a marketing powerhouse, possessing enough money and smarts to scare any small business owner bold enough to step into their world.
Since a small business will never be able to outspend such a large competitor, they must outsmart them. One way to do that is focusing on serving a specific type of customer, or by presenting a select offering.
“By carefully identifying, pursuing and catering to a niche market, companies can attract a loyal following,” comments Howard Lerner, an accountant and Partner with Richter LLP, a strategic accounting, business consulting and financial advisory firm. “And it can be far more profitable to sell highly specialized products or services – that warrant a higher price tag – to a select group of customers, rather than trying to cater to everyone in a commoditized, price-conscious market.”
For example, to attract the upmarket business travelers away from Air Canada and other short-haul carriers, Toronto-based Porter Airlines promises a “refined” flying experience that includes a comfortable lounge and free alcoholic beverages in flight. To compete with full-service garages, Jiffy Lube focuses on offering a very specific service: quick oil changes.
It is important to recognize that the very “smallness” of a small business creates two competitive advantages. First, because they’re small, they are nimble, and therefore able to move and react to marketplace opportunities in far less time than a larger rival weighed down by bureaucratic processes.
Secondly, with lower overhead costs and the ability to survive on less money, a small business can decide to embrace a specific niche market that aren’t profitable enough for large competitors. They’re called “million dollar crumbs,” and can provide well for savvy smart business owners.
“I believe there is gold in those crumbs,” says Toronto-based business coach David Cohen, who favours using these opportunities to help small businesses gain a foothold in larger marketplaces.
Then, fuelled by success in its niche, a growing small business can leverage the cash and reputation it earns into a play for a piece of another marketplace. Flush with success from his 1-800-GOT-JUNK business, Canadian entrepreneur Brian Scudamore is leveraging his resources to build his latest company. It’s another niche-serving business, called WOW 1 DAY! Painting, a franchise operation that promises to complete any painting job in one day.
Cohen, an author, business coach and host of the online radio show Small Business Big Ideas, identifies several benefits to dominating a niche market.
“You become known in the industry or segment, and that makes it a lot easier to sell and market because customers know exactly who you are, what you can do to help them, and what your business stands for,” he explains.
Focusing on a niche can boost the bottom line, too. When a customer values an offering (or it’s difficult to find it elsewhere) the business can charge more.
“By differentiating yourself from the competition, you give your customers a compelling reason to buy from you – even if you demand a much higher price,” agrees Lerner.
Higher profit margins can help a business build positive cash flow and free up cash for investment in marketing and promotional activities. These, in turn, yield customer results and contribute to activities that help beat out larger competitors.
Bigger margins also make your business more attractive to potential buyers should you one day decide to sell. In fact, you may just find yourself one day considering an offer from a buyer you recognize all too well – your big-business competitor, come to the realization that your million-dollar niche is too good to copy, and easier to purchase.
It’s the one time you may be happy they’ve got so much money.