Take any marketing literature and you come across experts who are talking about finding a niche and exploiting it. They tell you that, one should create a new market for your business thus making the competition irrelevant.Â But, the reality is that finding a niche will only work if you can fulfill three important criteria:
1) It should be profitable to serve that market
2) It should have enough number of buyers to make your business sustainable
3) The market should be growing so that you can continue meeting the demand for a long time.
If the niche is not profitable then there is no incentive for you as a business owner to serve it, if the business is profitable but it has low number of buyers then you wont be able to sell to as many people to meet your financial goals and finally, if the market is not supposed to grow then one day there will be no more buyers to sell to.
The theory of economics suggests, that if such a profitable, sustainable and growth-oriented niche market exist then sooner or later a large number of sellers will be attracted to it because of the profit potential. Then, the market will no longer remain niche and it will become â€œcrowdedâ€. Thus, the niche business theory sounds great buts it remains questionable as a long term business strategy.
Moreover, with time it will become increasingly difficult to find niche areas and information technology will ensure that any niches will become competitive faster than ever. So, being optimistic about your business because its niche is not a good strategy at all! Although being a niche can be rewarding in short-term (1 to 3 years) but you should actually focus on superior value delivery and effective competitiveness in a longer-term.
In order to remain a successful company you need to do the following:
You may be tempted into thinking that since the profits are high as you are playing in a niche market, you should be in plush offices and other things you don’t need. This is wrong! Soon, new sellers will create pressure on pricing and naturally, profitability will come down. Then, having a lower cost of operations will mean the difference between death and survival. Lowering cost does not only means cutting costs, but it also means having lower costs because of superior engineering skills. It a nutshell, you should make it impossible for your competitors to deliver the same product or service at lower cost.
Deliver Great Customer Experience
You need to look at every customer touch point in your business and see the kind of experience it delivers to your customers. Just making the customer happy does not ensure customers loyalty. The customer should have a great experience while interacting with your organization and should feel special. This will ensure that when the niche market gets crowded, you will get plenty of word of mouth and your existing customers won’t leave you.
Being different is not being in a niche. It means doing thing in way that is appreciated by your customers. You can be different in the way you handle Sales, Distribution, Manufacturing, Customer Service, Engineering, Branding etc. You have to ensure that this differentiation delivers more benefits at same costs as competitors or delivers the same benefits at lower cost.
Keep your staff happy
Your people are your only niche which competitors cannot copy. Ultimately, it’s your motivated employees that deliver outstanding customer service and build your organization.
Keep Changing for Better
You should encourage risk-taking, creativity and intrapreneurship in your organization. Stressing too much on existing tools, processes and techniques stop the evolution process which is necessary to ensure growth.