Does your business offer the right product to the right people at the right price? If so, you’ve found the sweet spot that we call a market niche. Multiple factors come into play in determining your market niche. Evaluating these four elements helps you define a market niche that enables your business to thrive:
- Your industry
- Your company
- Your product/service
- Your customers
In the previous two articles, we looked at how to profile your industry and company. In this article, we’ll take a close look at your products and services.
Seeing Your Product with New Eyes
The life of your business revolves around your product or service. But a product doesn’t stand alone. It needs to be evaluated in relation to your other products, the competition, and to the end-user.
This exercise helps you discover insights about your product that you may not have thought of before. For example, you may find a new way to talk about your product or a new feature to add to your product. You may decide to discontinue a product or category to sharpen your focus on other categories.
The following six questions provide a framework for evaluating your products and services.
1. What are your primary products/services?
Begin by listing your products (or categories) by their percentage of your total sales. You likely already know what your bestsellers and lowest sellers are. Getting it all down on paper helps you to think clearly and objectively.
Then consider additional questions like these: Why do we sell the amount we sell in each category? Why not more or less? What does this say about our marketing or sales process? What does this say about product/market fit? Is there anything to be learned about how well (or poorly) each product meets customers’ needs?
2. How is your product different from competing products?
Questions 2-4 deal with how your product/service compares to your competition. For this exercise, think about the top three alternatives that customers turn to instead of purchasing from you.
Consider factors such as the following:
- Aesthetics (how the product looks and feels)
- Functionality (including options)
- Useful lifetime
- Ease of use
3. How does your price point compare to competing products?
Are your prices higher or lower than your top three competitors’ pricing? You need to know how you compare because pricing sends an essential message to your prospective buyers. Your pricing is part of your overall marketing strategy.
Price is an important consideration from the prospective customer’s point of view, for several reasons. Some customers default toward purchasing higher-priced options, while others default to lower-priced ones. Also, pricing does not always equate to value, but customers often see it that way. They feel concerned that a low price will mean poor quality or low value.
4. How does your service compare to your key competitors’ service?
What are your customers saying about the way your business treats them? Some businesses do well at making their customers feel special. In other businesses, customers feel like just another number for the business to process, part of an assembly line that the business wants to keep moving as quickly as possible.
Consider these factors:
- Response time
- Product/parts availability
- Staff knowledge/helpfulness
- Open hours
- Ease of ordering
If your product and pricing are nearly identical to your competition, your service is one area where you can build a competitive advantage. The airline industry is well-known for not always having the best customer service, and Southwest Airlines used that to its advantage.
The online encyclopedia Wikipedia states, “According to the Department of Transportation (DOT), Southwest ranks number one (lowest number of complaints) of all U.S. airlines for customer complaints. Southwest Airlines has consistently received the fewest ratio of complaints per passenger boarded of all major U.S. carriers that have been reporting statistics to the DOT since 1987, which is when the DOT began tracking customer satisfaction statistics.”
5. What is the practical (hard) need that you are satisfying for the customer?
These needs are the problems that you solve for your customer. For example, a car meets the need of getting you from point A to point B. A house keeps you warm and dry. A wrench turns nuts and bolts. A lawnmower cuts grass. A shed provides space for storing tools and equipment.
However, these practical needs are only the surface. There is much more going on in the customer’s experience beyond simply buying a product to meet the practical need. Below the surface are your customer’s internal needs. These are the frustrations and desires driving the customer’s decisions, even when they don’t realize it. These inner frustrations or desires are often an even bigger factor in a purchase than the practical issues at play.
In Building a StoryBrand, Donald Miller writes, “This is where most brands make a critical mistake. By assuming our customers only want to resolve external problems, we fail to engage the deeper story they’re living. The truth is, the external problems we solve are causing frustrations in their lives and, just like in a story, it’s those frustrations that are motiving them to call you.”
6. What is the internal (soft) need that you satisfy for the customer?
What exactly are these below-the-surface needs that I referred to? I’ll give you an example from my own life.
I recently bought a pair of reading glasses. I had been noticing that text on the page was fuzzy, and I knew that I had a problem. My hard (practical or external) need was that I needed to see the type on the page well enough to read it. My soft need was to retain my sense of identity as much as possible, wearing glasses that fit who I am as a person. Glasses are like clothing. We are careful what we put on because it sends a message about who we are.
I knew my hard need was met when I put my glasses on the next morning and the text in my Bible was crisp and clear. And I knew my soft need was met when after a moment’s careful observation, my wife said, “They make you look sharp and intelligent.” What 43-year-old businessman doesn’t want to look sharp and intelligent?
In the example of my reading glasses, the soft need of matching a person’s identity is easy to understand. In your case, it may be more subtle, but it’s almost always there. Let’s look at the examples mentioned in the previous section: cars, houses, wrench, lawnmower, and shed.
Cars signal social status and the lifestyle people want to project. Driving a certain car makes the driver feel a certain way. A young man may drive a big, loud, tough-looking pickup because it makes him feel confident, tough, and in control. An older man may opt for an expensive luxury sedan because he wishes to project the image that he has been successful in life. A father may choose the most dependable minivan available as an expression of his desire to be a reliable provider for his family.
Houses express the owner’s tastes and values. A house is not just a building, but it satisfies the internal need of having a home and providing a safe and inviting place to raise a family and entertain guests. Many Americans don’t just want a place that is warm and dry, but they also want their homes to impress others. These are all internal desires.
Snap-On wrenches don’t just get the job done, but they give us the confidence that we’ll never pay for another one. A high-quality tool of a trusted brand makes the owner feel competent and equipped to tackle whatever challenges arise.
Lawnmowers (and lawn care services) meet the homeowner’s desire to have an attractive home and to be accepted and respected in the neighborhood. A lawnmower may also satisfy the owner’s desire to be a do-it-yourselfer, the weekend warrior who enjoys home improvement projects and keeping the place looking nice.
Sheds are highly functional products, able to meet many different practical needs. Thinking of internal needs, sheds help a person feel better about themselves when they can stay organized and have “a place for everything and everything in its place.”
Going below the surface
Your business’s opportunity will often be found more in the soft needs than in the hard needs. The hard needs are basics, the starting place. You don’t have a good product if you can’t successfully meet the hard needs.
When you begin to communicate how you meet soft needs, you will start connecting more with customers. Spend some time thinking about what drives your customers to purchase deep down inside. Think about their feelings and emotions, how they feel before they buy, and how they feel using your product.
This principle of practical vs. internal needs applies to the business-to-consumer market (B2C) and the business-to-business (B2B) market. A business buyer is not a machine but a human being like anyone else. He, too, is influenced by internal needs and desires.
For example, a business buyer may be motivated by a desire to look good to his boss or peers. He may want to be respected within the company or be seen as someone who can drive sharp deals. He may decide to purchase from a particular vendor simply because he likes one salesperson better than the other one rather than going only by the merits of the product.
Your product is likely not unique, and your business is likely not the only place where people can get it. But you can still develop a niche. Pay attention to the internal needs of your prospects. Offer your customers something meaningful in soft needs that your competitors are missing. If you have been following along with this series of articles, you are well on your way. In the next article, you will learn how to build a profile of your customers. Did you know that you shouldn’t try to sell to everyone? Stay tuned for next month’s article.