There is widespread confusion around niche marketing. Not all niches are equal, and some niches aren’t even niches at all.
Companies clearly recognize the need to specialize, but some struggle to find where they will focus their resources and expertise.
For example, professional services firms often describe their “family business practice” as a niche. It’s not. Focusing on family business a decade ago may have been novel and new enough to call it a niche, but today it’s standard. It would be odd if a wealth management or accounting firm didn’t offer specialized services for family businesses.
If everyone offers similar service, it’s not a niche. A niche strategy has to adhere to three components:
- Customers self-identify with the niche
- Specialized expertise or capabilities
- Market density to support a business
Customers self-identify with the niche
Are your customers looking for specialized expertise?
Niche marketing is a pull strategy. Customers perceive their needs as specialized, and seek out firms that can provide bespoke or targeted expertise.
A good example of this is Crowe Soberman’s Sports and Entertainment group. They provide specialized tax services for professional athletes and celebrities. Their clients are athletes in the NFL, NHL and ATP, or famous musicians and actors.
It’s a unique niche. If an athlete or an entertainer performs in Canada, they have to file taxes in Canada. The athletes’ accountants and lawyers usually identify the need for specialized tax expertise, and refer them to Crowe Soberman.
The phone rings, because the client identifies they’re looking for a niche service provider.
Specialized expertise or capabilities
Declaring your firm is a specialist isn’t enough. You’ve got to possess core skills, assets and capabilities that can’t be found at the generalists level.
National Logistics Services is the go-to logistics provider for fashion and footwear brands. Companies like Under Armour and Adidas choose them, because of their unique capabilities.
Footwear and apparel are challenging for logistics companies, because there are a lot of SKUs that change frequently. Each season brings new products, some take off and some fizzle and are discontinued. NLS has developed very robust systems, talent and processes to accommodate the shifting needs of their clients in the fashion sector.
Clients seek out niche providers, because they have specialized capabilities to support specialized needs.
Market density to support your business
Are there enough companies in the target niche to support a business?
Effective niche strategies are dependent on market demand. If your customers aren’t looking for specialists or don’t value specialists, then the niche won’t grow. You may land a few clients, but not enough to grow the business.
Market analysis is a critical step in developing a niche market:
- Are there enough companies you can effectively serve?
- Are the current suppliers serving their needs? If not, what’s missing?
- Do the customers perceive a problem? Would they value a specialist?
- Is the market searching the Web or asking their advisors for specialists?
Crowe Soberman and National Logistics Services have thriving niche markets, because they did their research and committed the resources to serve their markets. And once their customers realized they could get something better, they began beating a path to their doors.
But without the density of customers, there wouldn’t be a story. A niche strategy requires the planning and commitment to grow it from an idea into a market.