Since I started my own business, almost every marketing and sales blog, advice column and guru I’ve read or heard has touted the absolute imperative of finding your market niche. That little pocket of the market that is all yours. That oasis where there are lovely hungry clients, with deep pockets and big chequebooks, that need your services – not those of your competitors – and are willing to pay premium price for them.
Brian Tracy refers to this as dominating a deep market niche in his book Marketing (The Brian Tracy Success Library). Ari Galper talks about positioning yourself in a “Category of One”. Jeff Walker says the right niche market is a critical first step to building a hugely profitable online business.
Struggling with the niche
Whilst I agree with this in theory, I’ve struggled to define my specific niche and put it into practice for my business. What does niche really mean? What’s the difference between a market niche and a value proposition? Does finding my niche mean I’ll be stuck doing the same work for the same type of client forevermore?
So I’ve decided to educate myself, and in so doing, invite you to take the journey with me. In this article, I’ll be looking at the pros and cons of having a niche… and helping to decipher what’s what. I’d love to hear from you whether you’ve struggled like me or if you’ve found your niche and are running a successful business based on that.
A little background
My background is in financial services – mostly investment banks and fund managers based in Sydney. I started my career in investment operations and research, moved into client services and sales, and then opted for more variety with strategic business and process improvement projects.
After all that, I decided to start my own business doing what I loved to do, which was resolve problems for businesses and help them create appropriate business strategies for future growth and stability.
So how the heck do you define a niche out of that? To be truthful, I feel I am more of a generalist. This is what I think makes me able to look at a business and identify the areas that need improvement. Had I not done a lot of different things in my career, I wouldn’t be able to take this holistic big picture approach that my job requires.
But does having a market niche mean I need to stop being a generalist and start specialising in one thing?
So what does creating a niche really mean?
From what I’ve read, defining your niche means a defining a specific product or service which addresses a specific problem or issue for a specific segment of your target market. The segment of your target market could be a particular demographic of individual or a certain type or size of business.
When I think of the business consulting services I provide and all the ways I can slice and dice this, I see the possibilities are endless. This is why creating a niche market is not easy and must be carefully considered, planned and tested.
Why having a niche is good
In 7 Steps to Defining Your Niche Market, Entrepreneur quotes Lynda Falkenstein, author of Nichecraft: Using Your Specialness to Focus Your Business, Corner Your Market and Make Customers Seek You Out:
“Rather than creating a niche, many entrepreneurs make the mistake of falling into the “all over the map” trap, claiming they can do many things and be good at all of them. These people quickly learn a tough lesson. Smaller is bigger in business, and smaller is not all over the map; it’s highly focused.”
Lynda goes on to list some of the pros of defining a niche:
1. Helps you focus
It does make sense that a niche helps you find focus and the most focussed you are, the less chance there is of wastage in your business, and inefficiencies resulting from being everything and doing everything for everyone.
2. Reduces direct competition
Regarding reduced competition, Ari Galper said it – put yourself in a Category of One. That is, make it so that you can truthfully say the following in relation to your niche market:
“We are the [leading/only/number 1] provider of [your niche product/service] to [your niche market segment].”
For example, I might try the following niche for my business – provide staff management and workplace advice for SME-sized law firms (with 5-20 employees) in Sydney. I imagine there are too many business consultants with that specific niche market.
Not having much (or any) direct competitors is pretty powerful. Of course, bad luck if there aren’t many law firms out in Sydney who need workplace advice. But more on the negatives of the niche later.
3. It’s less confusing for your prospects/clients
A well-defined niche is a darn sight simpler to explain. Theoretically, having a niche should turn your networking experiences into a true joy when you’re asked that age-old networking question “So what do you do?”. And writing your website copy would be a much simpler process.
Why having a niche is not so good
Despite all the positive press on creating your niche, I am not 100% convinced it’s right for my business as I fear it may be limiting. Sharon McElwee agrees. In her article for Millo, Why “pick a niche” is bad advice and what you should do instead, she points out the cons:
- You can stifle your creativity
- You set dangerous limits on your business
- Switching niches is really difficult
I tend to agree with these. For me, I think I would get bored just doing the same service for the same types of clients all the time. Part of the reason I started my business was to get some variety and interact with different and varies types of clients on an ongoing basis.
If the niche you’ve defined for yourself isn’t well thought out or dries up, you can be in a lot of trouble and then you are faced with redefining/switching niches, which can be costly and time consuming.
The verdict
So what’s the upshot? After weighing up the pros and cons, I’ve come to the conclusion that creating a niche is definitely the way to go… BUT… I have some qualifications…
1. Don’t rush the process.
Defining your niche must be carefully considered and tested before you go too far into changing your website and all your marketing collateral. AND… make sure you don’t let any “non-niche” clients go until you’ve done a thorough market test. You want to be sure there really is a market and that this new segment of people/businesses will actually want your product/service.
2. Have a backup option.
Have a backup option in case this niche doesn’t work out, so that switching niches is not a huge problem, both from a time, cost and reputation perspective.
3. Ensure having a niche (specialisation) makes sense for your business.
If your value proposition hinges on knowing a little bit (or even a lot) about a lot of things, then choosing a niche might not make sense for you. Perhaps clients come to you because you are a “one-stop’shop” or perhaps you are the glue that brings together a bunch of specialist services into an overall package for them. In these cases, reconsider defining a niche, or simply focus your ideal customer (and not your product/service).
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* Image sourced from Shutterstock.
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About the Author: Angeline Zaghloul is an expert in business strategy, client management and business processes, and is the Principal of Peer Business Consulting, a Sydney-based consultancy providing strategy and operations support to startups and SMEs. Angeline also publishes a regular blog which provides research, advice and tips on key issues facing businesses.