When Niching Works: Marketing a niched business
Season 4, Episode 22
In the episode, I explore the pivotal question of whether to niche or not and it's impact on digital marketing. I dive into the importance of defining a niche, the benefits and limitations of niching, and how businesses can effectively market their offers with examples from various industries to show how niching or broadening your target audience impacts your marketing strategy and growth potential. I also break down how these learnings could impact how broader businesses can segment their audiences.
Transcript
To niche, or not to niche, that is the question.
You’d be surprised how often this business question gets brought up in marketing conversations. I understand it, because people want to know if they’re operating in the right spaces, or of they’ll be limiting themselves too much.
A niche goes well beyond your average target audience of gender, age and a general interest. Niching is when your target audience is a very specific group of people. Your business and marketing decisions come back to your offer, and how it serves a specific need of that audience. When you niche, you can get in deep with those people, serve them precisely and not change your offer to be attractive to a broader group of people.
What You Want
It’s important to identify what you want to do, your motivations will override a lot of other decisions.
My business is very much not a niched one. I like the variety of working with lots of different businesses on different types of projects, and I can’t get trapped in a common answer, so it’s more about solving the problem, or seizing the opportunity, at hand. There’s endless possibilities, and a lot I’ve learned from service businesses is still relevant for retail and ecommerce and vice versa.
On the other hand, you might have identified that you really love working with a specific type of person, because of the needs they have and the way that you can help them or work with them. You might be a chef, but love specifically working with professional athletes, who need meals that help them with recovery and fuel. Sure, everyone needs that nutrition on some level but theirs is tied to their revenue stream so they have a little extra motivation to pay for it. Assuming you have an in, there’s really no need to branch out, unless you want to.
When Niching Works
When niching is done well, it’s because you’re serving a reasonably large and dedicated, yet specific audience, and they know your offer well.
Your offer serves such a legitimate need, with very little competition, that the purchase is somewhat of a no brainer once they find out about it.
The offer is usually a larger investment, either as a one-off, or in Lifetime Value, since a cheaper offer has to be sold so many more times over to make it viable.
Niching can be a wise tactic. You just don’t want to take it too far…
Niched By Your Location
Location dependant businesses are one example of a niche by default, since sometimes selling anything in only your town is a small enough group of people. If you have a donut shop, and they’re best eaten fresh and you don’t offer delivery right now, so customers have to visit your store. Niching further would probably be a step too far. Now, if you’re in New York City, it’s a bigger audience and has the possibility of being a tourist stop, so even if you offered gluten free or some other allergy based niche, or they were extra niche through ingredients like gold leaf making them more expensive, you still have a chance at being viable, assuming they’re worth the trip.
I’ll be honest, niching does come up less often here in New Zealand, because audiences can be a small enough group when it’s a subset of 5 million people. Our total population is less than many major cities, yet very spread out. When you filter that by an interest, and a relevant need, that’s pretty specific.
A Growing Niche Audience
Another way that this can work well is that your potential audience is growing, and you can grow with it. Sometimes this will happen out of your control, but you can push this if you want to dedicate time or have the capital to invest.
Think of Poppi. I know it’s a hot topic these days, but this was the case long before they were acquired. When they started out as Mother Beverage, the number of people who were aware of the benefits of probiotics was a lot smaller than it is now. What was even smaller was the number of people who wanted to help that issue with an everyday product that wasn’t a supplement, or yoghurt. It’s also not the cheapest way to get your probiotics, but it’s better than an alternative.
Their product tastes great, and isn’t as thick as other “healthy” sodas, so it stands out, even though it probably wasn’t the first ever probiotic soda. I recently tried Poppi and it’s main competitor Olipop on my trip to North America this year and Poppi won on taste for me. The brand and its packaging design also plays a massive part, with both brands having distinct packaging that stands out on the shelf.
Some of the win here is backing the right horse, as in being onto that winning idea at the right time, with the capital to see it through over a longer amount of time. That’s partly luck, and partly how good the idea is, on top of how well you execute.
The larger the audience grows, the more word of mouth you can have, and the more a breakthrough moment can occur. You’re also less limited in who might convert from a broader marketing campaign and can increase your return on ad spend. As you sell more product, the more that economies of scale comes into play, and the momentum can continue to build as your product or service becomes more mainstream.
Sometimes, spending time to grow your audience means growing the understanding of your offer and its benefits within the wider market. It’s like PR for your solution, as well as of your brand. Going on Shark Tank might help as well.
Expanding From Your Niche
I’ve heard so many, admittedly self-proclaimed, experts talk about starting with a niche and expanding from there. As much as that works as a sound bite, there’s some parameters that make it work in real life.
Issues start to come up if you’ll need to change your offer, even slightly, to make that expansion work.
The growth usually only works out in the long run when you unlock larger audiences, but often also when you add new offers for those new audiences, since you really can’t change what got you this far.
Think Stanley cups, originally designed for working-class people and outdoorsmen, but now the latest hydration accessory. The core product also works for a generic audience, so they added new colours and styles to expand into female focused markets being dominated by other brands.
A food product business might make seasonings and accoutrements for those who are gluten free, or have coeliac disease. Once they’re established in the niche, they could expand with a few key factors. The product has to taste good enough, and be priced well enough that it’s competitive for people who aren’t restricted by their diet and have more choice. Any change to the product would lose the trust of the original customers, so it would get complicated if at any point they added a product that wasn’t gluten free under the same brand.
A designer might start out by creating websites for yoga businesses. Over time, they can use their learnings to branch out, but keep the learnings of the tech, creating bespoke designs for each studio and how to deliver a great service experience to create sites for any other wellness business, or any business at all. What is important is understanding what those other industries need, because a yoga website needs to look and feel very different to an accounting firm.
A clothing designer might be particularly great at making dresses for women, but when they expand into pants or activewear, if those products aren’t as on point, maybe they’re rushed, or not as elevated, that can bring down the overall brand.
A real estate agent might specialise in selling newly built apartments for developers. Once they’ve sold one or two developments, they’ve created a larger network and can expand into more properties. In that business, knowing the developers is the key element to getting the listings and so maintaining those relationships will allow them to do both. They just have to treat someone selling their single family home a little differently, in a way that suits their needs.
When you go broader, your larger audience allows you to find more ways in. You can find more overlap with collaborators, since there are more people who serve the general audience, that still don’t offer the same thing you do. That might also extend to the events you could market at, or podcasts you could be a guest on. You can always create specific content for smaller segmented audiences.
The decisions you need to make are:
Who is this audience?
How familiar are you with it?
What are the inroads with this audience?
Is this offer something that this audience needs badly?
Are there other options on the market?
What price point could you feasibly sell your offer at and does that allow room for profit?
This will impact whether you should niche or not, as well as how you create your marketing and what options you choose to execute on.
So to answer the question of whether you should niche or not, as with almost every marketing question: It Depends.
Your business will have to find a balance among all of these factors to effectively market your offer, and generate a profit.
If you are marketing a niched brand:
You can get really specific on how you can engage with this audience, what platforms they hang out on, what questions they have, what your offer would do for them and what their motivations are.
Realistically, you possibly understand this need well because you are a part of this community. The deeper you can get, to the core people, and then broader with a reasonable amount of reach by meeting people, getting involved in the community, whatever that be, maybe events or online forums, the more you can understand them but also people will get to know you as the person who sells that offer.
Advocacy can be really important to any brand, but in a niche audience, there often isn’t the classic influencers, and broad campaigns have a lower return on ad spend, so word of mouth is the critical area of growth. Niche audiences do tend to have more 1 on 1 word of mouth than general audiences, because they’re talking about their interests more than they would say a toothpaste, or something that isn’t visually clear, so the more you can foster that, the better. Word of mouth is often out of your control, but there are ways, like creating referral programmes, asking for reviews, or even just giving them the talking points to repeat.
You can identify those key collaborators who serve the same audience, and find ways to connect with them, with the potential to later work with them, but to get to know them to start. We’ve all been at events and talking to a person who clearly just wants to get their business card into your hand and move onto the next person. True networking is community building, not in putting on the event and hosting, or at least not always, but in making 1-1 connections that are based on a common interest or viewpoint, and then ongoing communication so that those smaller conversations build into something larger.
Your messaging needs to be super clear. It always needs to be clear, but when you’re niched, it also needs to be super clear to that community that it’s exactly for them, using the phrases they would use, and your product or service use cases, rather than even slightly broad phrases.
Audiences that exist on the periphery of your core audience could be an area for expansion, although they might require different talking points, that are more relative to the reasons why they’re in the periphery. Sometimes your core audience is the person doing the thing, sometimes it’s the parent or guardian. That can be the case if you sell something related to a sport and the most people who play that sport are children. Their parent is actually your core customer because they’re the one buying it, but the child might be the one who either asks for it or uses it. The same goes at the other end of life, for aged care. The parent is using the service, but their child is the one who does the admin for it, possibly choosing the facility they go into. Sometimes a periphery audience is the partner of the person who will use the item but you want them bought in too. That could be something to do with home maintenance. The result is incredibly important to the spouse, as is the safety, but they might not care as much about how the thing actually operates. Those might not be overly niched examples depending on the offer, but you get what I mean.
To make progress, you should review all of your content to understand what is and isn’t working, because the specifics are more critical for a smaller or more specific audience. You can’t put this off as long as you might be able to get away with for a broader audience. Your margin for error is so much smaller.
If you can identify what is resonating, not only to repeat it, but to better understand it. Over time you can connect the dots, see what the commonalities are, and make slow adjustments. Sometimes that is the format and sometimes it’s the topic or the message, or a way something is particularly shown or phrased. This is a constant development, broadening and deepening your knowledge over time, and sensing those shifts in what used to work, but now isn’t, and why that might be.
Assuming your offer could be purchased multiple times, you can also analyse your customer’s re-purchase cycles to see what needs more focus.
Since your product isn’t exactly in the supermarket, you have to find a way to facilitate future purchases and make it as simple for them as possible. That might be creating reminders through email or ads to people at a specific length of time after their last purchase.
If you have a subscription, are there average lengths that someone might subscribe for before they pause or cancel?
Are there natural peaks and troughs throughout the calendar year, like lots of people start their subscription at a time of year, and pause around the same time. Even without a subscription, there might be trends in when people re-order. Wherever there are common threads or trends, that can give you insights into their shopping behaviour. There might be obvious reasons because of a seasonality around the niche, or it might be around when you’re running discounts. These are the kinds of insights that are easier to glean year after year, because you can see that history is repeating, so if you’re seeing a trend over a shorter amount of time, you might like to assess it against your brand’s activity, what’s happening within the audience or community, and trying to assign possible causes for any shifts.
Marketing to a broader audience
If you are marketing a brand with a larger audience, there are learnings and tactics you can implement, that can still benefit you.
Take advantage of your broadness by getting involved in multiple niches. You can go in deep with mini audiences, getting really specific on which subsets of your audience could potentially be interested in your offer, and setting a few smaller audiences to market to. Those might be based on their motivations, which product or service might be right for them, or their industry. Going back to that web design example, you could have a series of case studies and topics of content for different business types, so that the specific group know you service them and that you understand their needs.
You can also identify collaborators who serve the same segmented audience with another offer, and how you can get specific in the area that relates to them to create something new.
You can also segment your email list, so you can get specific in that format too, while also sending other mutually beneficial content for all audiences. That segmentation could be based on the offer they interact with, their purchase history, the size of their business, their industry, their purchase motivation, anything that makes sense for your business.
Niching is a choice, but it is a choice that directly relates to your offer, your goals and the customer you truly want to serve. Once you choose your route, the actions you add to your to do list will need to correspond to that, with the combination of depth and breadth that your audience needs to be able to find you.