Much has been written about the advantages of selling to a niche market. However, the attribute that makes niche markets profitable is also the thing that causes headaches in the long run.
The beauty of niche marketing is that when you target a smaller, specialized group of consumers, you can enjoy healthy profit margins. However, because niche markets are by definition small, they pose something of a Catch-22. Although you can enjoy good margins, you can also saturate your niche market more quickly and eventually find yourself lacking prospects. Profits go down as advertising and marketing expenses go up.
The challenge then becomes to broaden your niche without turning your product or service into a commodity where margins are super slim. The best way to do this is to “multiply” your niches by discovering and developing what are essentially parallel or related niches, where you can market and sell your product or service “as is” or with slight modifications.
Here are four strategies to try when your niche begins to pay diminishing returns, or when you simply want to grow your business more quickly.
1. Explore different cultural groups
One of the advantages of doing business in the United States is the diversity of our communities. We’ve always been a diverse nation and we’re getting more so every day. But at the same time, unlike some other countries, we’re pretty successful at assimilating individuals from a wide range of cultural and language backgrounds.
I remember a joking phrase I used to hear in the workplace when managers wanted something tweaked. They would say they want it “exactly the same, but different.” In many ways, Americans from varying backgrounds are “exactly the same, but different.”
If you have developed a niche market, there’s a good chance you’ll also be able to find parallel niche markets among different cultural and language groups. You may have to develop marketing strategies and materials that are sensitive to and appeal to the different groups, but you probably won’t have to change your actual product or service all that much.
2. Widen your age appeal
Some products and services can find ready niche markets among a wide variety of age groups. In many cases, this is due to what seems to be a “flattening” of perceived ages. For example, today’s baby boomers—who are either in or quickly approaching retirement age—don’t view themselves as “senior citizens.” Products and services that have found successful niches among Gen Xers and even millennials may find willing buyers among the older set.
This also goes the other way: If your niche is focused on a group of adults, going younger may be the answer. One sports medicine provider, for example, carved out a strong niche market among professional and college teams. However, HSS Sports Medicine recognized a growing market for specialized health care among much younger athletes and adapted its content marketing to include this group.
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3. Find other professions/professionals
A proven road to success is to develop a service that can appeal to multiple professions. An example would be a website developer that specializes in real estate websites that can be expanded to develop used-car websites. Both typically feature a series of items for sale with several photographs. However, when you “clone” and tweak your service in order to cater to a different industry, you can’t send used-car prospects to your real estate website. While the bulk of your coding would be very similar, the “face” you present to your prospects would be very different. It would probably take a new website, social media identity, and other materials.
4. Go west (or east, or north, or south, or overseas), young entrepreneur
If you’ve done a great job exploiting a niche in one location, perhaps the same niche is waiting for you somewhere else.
One of my favorite strategies is to spend some time in a trendsetting area and see what’s hot. In the United States, this might be the Los Angeles area or New York City—honestly, it could be almost anywhere. The key is to look for a product or service that is successfully selling to a niche market and then take the idea to an area that is a little “behind the curve.” The flip side of this applies to business owners who currently have the “hot idea” in their home towns. Find similar communities where your niche likely exists and explore expansion to those areas.
Even industries that are typically considered commodities can sometimes take advantage of this. For example, small overseas pineapple growers can’t compete with the multinational corporations for the commodity trade, but they can develop niche markets in industrial nations for organically grown pineapples. We’ve seen the same thing in coffee.
By employing some combination of these four strategies, you should be able to grow your business, maintain your margins, and not be brought to an eventual screeching halt by the niche market Catch-22.
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