In this post, I share my answers to Frequently Asked Questions about establishing a niche market for your business, including:
- Why is niching important?
- Can niching go too far?
- How do I decide on the right niche?
- Why is it hard to limit your business?
Plus other topics related to picking a niche.
Watch part 2 of the Facebook Live video, or read the transcript below!
FB Live #4
Topic: Niche Markets
Recorded: Thursday, 08/09/18 10:30 a.m. – 11 a.m. Pacific Standard Time
Frequently Asked Questions about Niche Markets
1. Can you explain what it means to niche a business?
As I mentioned this already in Part 1, creating a niche involves 3 things:
- Select a specific market, for which you provide services or products that meet their needs,
- Set limits for what you will and will not do in your business, and
- Focus your attention on solving problems for that group of individuals.
2. What are the benefits of niching, and why is it important?
There are many reasons for considering a niche market:
- Reduces stress in managing work responsibilities
- Allows you to clarify your goals
- Increases your level of productivity
- Improves your ability to connect with others
3. Is it possible to limit a company’s niche too far? What are some of examples of when NOT to niche?
Yes, there are some situations in which niching may not be a good idea:
- If you serve a large market and limiting your services would reduce your profit margins by limiting the scope of services or the type of customers you serve.
- If you provide a customized service (such as health or wellness coaching, hair or skin care, clothes tailoring, chef food preparation, artistic projects, etc.) with “one-off” or “bespoke” projects. Limiting your inventory or abilities may reduce your effectiveness.
- If you don’t want to give up any of your current customers, and you feel like niching would take away from the relationships you’ve formed.
- If the idea of setting limits makes you feel really uncomfortable and too risky, then you may not be ready to niche.
However, I do think the concept behind creating a niche can be helpful for every single business. The most successful company owners are open to new, creative ways to reach their target customers—people who generate the highest profit margins with the least effort. (Read more in my previous discussion, Analyzing Profit Margins FAQs Part 1: Perceptions).
As an owner, you have the opportunity to tailor your services or products to meet your customers’ needs. And the best way to do this is by setting boundaries around the services you will and won’t provide, the customers you will and won’t serve, and the culture will and won’t allow in your company.
4. How do I decide on a good niche?
There are 8 strategic areas that can help you decide on a niche for your company, a concept I found in a book called Strategy Pure and Simple II: How Winning Companies Dominate Their Competitors, by Michel Robert.
This book was published in 1998 and has some fantastic information, although a bit dated (some of the companies used in the examples have gone out of business). But the best part of Mr. Robert’s work is his concept of strategic drivers, or the driving force which gives it a competitive advantage.
As you think about how to niche your company, consider these 8 strategic drivers.
- Product or Service Driven
- User or Market Driven
- Production Capacity
- Technology Driven
- Sales and Marketing Driven
- Distribution Method Driven
- Natural Resource Driven
- Size, Growth, or Profit Driven
In an upcoming Live episode, I’ll talk more about Ideal Customers, how to find them, and how to leverage your relationships with them in order to generate more profit.
5. What are some reasons business owners feel scared to limit their market?
These fears line up with our 5 basic needs (per Dr. Abraham Maslow). I call this combination “Needs, Fears, and Expectations”; see my graphics below.
The five areas where we all experience fear include:
- Fear of not meeting basic physiological needs like food, shelter, water, and avoiding pain.
- Fear of feeling unsafe and invaded.
- Fear that people won’t hold you in high esteem and won’t approve of what you do.
- Fear of not being accepted, or of not belonging.
Loss of Autonomy
- Fear of losing the ability to think for yourself, or inability to make independent decisions.
While it is possible to go too far (by picking an area where there is zero interest, or by ignoring feedback from Ideal Customers), a true niche will happen if you
- focus on solving real problems,
- offer solutions that perfectly fit a segment of the market, and
- communicate the value to your Ideal Customers clearly enough that they feel compelled to ask you for help.
6. What are some books you recommend for finding a Niche Market?
I mentioned several of my favorite books in this video:
- As mentioned above, Strategy Pure and Simple II: How Winning Companies Dominate Their Competitors by Michel Robert is a great resource that is useful if you’re interested in strategic planning concepts, although it’s a pretty intense read.
- The Millionaire Mind by Thomas Stanley, Ph.D.
- The Millionaire Next Door by Thomas Stanley, Ph.D. and William Danko, Ph.D.
- The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber.
- If you’re in a consulting role (or curious about how to do it successfully), I recommend The Consulting Bible: Everything You Need to Know to Create and Expand a Seven-Figure Consulting Practice by Alan Weiss, Ph.D.
Although it is written primarily for consultants (an expert who provides professional problem-solving services), the advice in it can apply to anyone who owns or manages a business. Throughout the book, Dr. Weiss offers an interesting perspective on niching and how to estimate the value of your services.
Dr. Weiss also references the work of Dr. Robert Cialdini, who literally “wrote the book” on influence. It’s called Influence: The Psychology of Persuasion.
Dr. Cialdini’s work (including the 6 Principles of Persuasion below) is often quoted without giving him the credit, so if you want the source of this incredible work, be sure to read his book.
Tune in to the next installment on Ideal Customers, where I’ll be talking about the power of Influence.
If you have questions about how to define a niche for your company and reach your sales goals, schedule a free 30-minute consult with me today.
Grace LaConte is a Strategic Risk Expert who helps service business owners find and fix organizational vulnerabilities. Using her experience as a Risk Officer in the healthcare and technology fields, Grace shares a refreshingly honest approach to uncovering hidden risks and opportunities. Learn more at http://laconteconsulting.com, or connect with her on Twitter @lacontestrategy.