What is all this dialogue about “niches” and who should really care? Why should your next business plan focus on finding and developing a niche?
Seldom do two people from the same discipline (sales, marketing, research, etc.) define niches the same way or agree to the value of pursuing the domination of a niche (if the idea ever comes up).
If defining the niche is hard, let’s define “domination” and see what kind of agreement we can reach.
In the Science of “Revenue Generation,” to develop a “Revenue Strategy,” you must answer 5 foundational questions. Question number three is: “What is the niche or niches you plan to (or do) dominate?”
To have a successful Revenue Strategy you must dominate a niche. Beyond the strategic requirement for dominating a niche, there are 4 critical operational reasons to dominate a niche:
1. If your Revenue Strategy is not compelling enough to even attempt to dominate a niche, you’d better rethink your strategy. Your ability to dominate or to at least challenge domination is a quality control point for your Revenue Strategy.
2. 99% of all the companies on the planet have more possible customers (suspects) than resources to call on them all (even with the internet). So, everyone needs to marshal their resources in a very focused way to get the biggest return possible for invested resources. That focused way is a niche.
3. If a company in a hot market decides to let random opportunity drive their revenue direction, the following are some of the risks from that random effort:
a. Fulfilling anyone with a need with a general offer that is not truly compelling will fail in a more competitive market.
b. Fulfilling anyone with a need in a hot market results in a cost and pricing structure that has never been really tested, which results in high costs, low margins, and a price not based on value or proven to be competitive.
c. Fulfilling anyone with a need does nothing to create long-term customer relationships.
d. When a market is hot, it appears to be satisfied with random fulfillment. When the market cools – or is serviced by a focused/lean competitor who delivers high value – the random fulfillment seller is at great risk or disappears.
e. Lastly, if you are in any market that you are not dominating or working towards domination, the customer sees you like every other random vendor. When that happens, the buyer’s decisions are driven by price. At this point, the seller that has decided to dominate the niche through high value or lean operations will win over the random fulfillment company every time.
4. When you dominate a niche based on adding real value, you:
a. Make more money
b. Have higher margins
c. Win more deals
d. Win more deals with less selling cost and time
e. Have more repeat business and referrals
f. Attract the right customers, staff, and partners
Let’s be clear about what we mean by niche and dominance from the Revenue Science point of view.
A niche is a market that has the problem you uniquely solve and can be compelled to buy your offer so both parties receive high value.
From your standpoint, a niche may seem very large. So to dominate, you have to define your target niche so you have the Revenue Resources Required to execute domination. Working this into your next business plan will keep your resources focused and not wasted.
For years, Apple dominated about 5% of the computer market, but their customers were loyal, repeat buyers. They paid a high price. They did not just refer additional business to Apple, but were fanatic evangelists of Apple products. Apple truly dominated that niche, but not the computer industry.
Every company should target and dominate the niche that they selected in their Revenue Strategy, which is supported by the necessary Revenue Resources Required to execute domination. Picking a niche to dominate that is beyond the available resources is to be out of integrity and will harm your brand.
Deciding to dominate a niche or a few niches (based on available Revenue Resources Required) will make everything more aligned. It will be clearer and simpler for your team to execute. The market will recognize who you really are by what you do. You will avoid a high “Cost of Chaos,” so you will make a lot more money.
Don’t pretend you can do everything and randomly fulfill a general market. No one will believe that. Even if your market is hot, dominate niches. It is more profitable for both the short-term and the long-term. Dominating a niche will give you a strong foundation to build on for your business planning.
Take a step back, get clear, and start dominating at least one niche now.
What do you think?
Please share your thoughts and experiences with us here!