When Smaller Is Bigger: The Benefits of Developing Your Niche

Preston wasn’t sure he had what it took to be a business owner, but when he had the opportunity to get into the printing business, he took it.

Preston settled on a slogan that perfectly expressed his vision for Preston’s Printing: “Exceptional quality, speed, and price–no project too large, too small, or too uncommon.”

Preston’s Printing got off to a great start. Preston was elated—maybe this whole thing of running a small business wasn’t so hard after all.

Small forms, stationery, and card projects flowed in. Then came the sell sheets and brochures. Labels? Sure! Preston invested in more equipment. Catalogs? Yes, we can do that! One thousand catalogs stretched the staff, but they cranked it out. Every week Preston urged his employees to work faster and longer.

But after several months, things started to fall apart. Preston first noticed it when Elaine, his customer service representative, mentioned one Friday that she had taken several calls from unhappy customers asking about the status of their orders. Preston thought some customers just seemed to have unreasonable expectations about turnaround times.

The phone kept ringing. Preston found himself handling calls about quality problems. One time his people folded a brochure the wrong way, so it was inside out. Another time some pages were missing from an annual report they had printed for a customer.

Whenever this happened, Preston offered the customer a discount on their next order. He liked to treat his customers well, and didn’t want them to leave for a competitor.

Then came the big order—20,000 catalogs treated with a special coating process. Preston gathered all the help he could get, including his cousin’s boys who came after school. The little press did well at first, but then the paper began to jam. The same afternoon, the special coating began to gum up the rollers on the press.

Tension was high—they were getting behind schedule. Preston sent the crew home at 10:00 that night with only 20 percent of the project complete. The next day started well, until they needed to throw away a whole stack of printed sheets because of operator error. A quick calculation told Preston he would not have enough paper. He ordered some more.

On the fifth day, they were on the home stretch when one of the helpers stacked printed sheets too quickly and 500 copies were smudged. The receptionist came to the back and said there was a customer out front whose postcards were supposed to be finished three days before. Preston sighed. He went to the front . . . more promises, more discounts.

Finally, the big project was done. But so was Preston. That night he began to look at the big picture. His accountant had been warning him that his margins were too thin. The numbers weren’t looking good. He was in debt trying to keep up with an increasing variety of demands. His employees were stressed. He knew Preston’s Printing was getting a reputation for mistakes and slow turnaround time. Worse yet, his family complained that they never saw him and that when he was home, he was distracted and irritable.

Preston put his head on his hands. Why had he ever gotten into this business? His worst fears seemed to be coming true. Preston felt like a failure.

The next day, Preston’s uncle stopped by the print shop. Preston took him back to his office and poured out his problems. His uncle listened quietly, and then, pointing to the slogan on Preston’s business card, said, “You cannot run a business and offer all of these things at once. You simply cannot be everything to everybody.”

Preston knew his uncle was right. He started to do some serious rethinking. Fortunately they had been tracking the costs and profitability for each project. As he pored over the numbers from the past three months, patterns emerged. Preston envisioned the types of customers for each product and quantity range. He envisioned what he wanted his business to look like in ten years.

Based on his new vision for his company, Preston began to make changes. The first thing to go was the old slogan. Then he identified three profit centers he wanted to nurture. Two of the profit centers fit nicely with a mid-scale printing company image. Preston decided to have his company brand redesigned to communicate this image.

The third profit center was a high-end specialty with high profit margins that served a unique set of clients. Preston created branding that spoke specifically to this specific group of people. He trained two of his staff to handle calls and walk-ins for this service. This left the rest of his employees free to serve the medium-to-large projects that accounted for 70 percent of profits.

Preston arranged meetings with three smaller printers in the area. One of the shops specialized in die cutting, foil stamping, and other specialty projects, so he set them up to be his dedicated vendor for these services. Delighted for more volume, they gave him a price that allowed a nice markup. The other two shops became referral options for customers with jobs too small for the “new” Preston’s Printing he was creating.

Preston educated himself about the needs of his customers in each niche. He set clear boundaries for the quantities and job types that fit them best, and he developed marketing pieces to communicate these messages to his prospective customer base.

He set reasonable work hours and created a training regimen to improve employee competence and instill enthusiasm for the new direction the company was going. With time, employee morale took a giant leap, customers grinned, and profits soared.

Jack of All Trades

What can we learn from Preston?

Sometimes smaller is actually bigger. For many businesses, focusing on a small niche has big benefits. A niche is a subset of a larger market, often defined by demographics such as age, income, gender, or location, or by psychographics such as goals, values, and worldview.

For example, instead of targeting all consumers in the surrounding area, a grocery store might cater only to those looking for organic foods. One construction company might build new homes for high-income customers while another focuses on affordable remodels for homeowners with average incomes. Or in Preston’s case, narrowing the overall focus to serve customers with mid-sized print projects and then taking additional steps to serve a specialized niche within his larger niche.

Developing your niche benefits you, your employees, and your customers. Let’s look at five results of thriving in a strong niche.

1. Happy Customers

Developing your niche allows you to become a master of your trade instead of being a “jack of all trades, master of none.” And because you are a master, you can do better work for your customers, who come to depend on you as the expert or the go-to source in your field.

Without a niche market, customers have conflicting preferences. But with a clearly defined customer profile, your business processes can be refined to more effectively and efficiently satisfy the specific needs of your niche market.

Consider Joe, the owner of a rental company, who was developing procedures and pricing for renting out a specialized piece of equipment. As he pondered his prospects’ perspectives, he wondered, “Would our target market prefer a lower rental price with the requirement to refill the fuel tank before returning it? Or would they prefer a slightly higher rental charge in exchange for the convenience of not needing to fill the tank?”

Joe began to realize that the equipment would often be rented to companies that would not keep a gas can on hand. Because he understood his target audience, he knew they would rather pay the higher rental price than the bother of finding a gas can, driving to the gas station, and filling the tank– all while trying to get to their next appointment without smelling like gasoline.

Joe’s thoughtful tailoring of his services to the niche he serves is one of the many reasons his customers enjoy doing business with him.

2. Happy Employees

Discussing American foreign policy before he was elected president, George W. Bush said that “we can’t be all things to all people.” His point was that the United States should not try to solve all the world’s problems.

As Preston learned, our businesses cannot be all things to all people either. Trying to do so will frustrate both your employees and your customers. Instead, focus on serving your “probable purchaser,” which is what we call the type of person who is the best fit for your product or service.

Serving a narrow range of customers is easier for employees and management than serving a broad, diverse range. A higher percentage of customers will flow through standard processes with fewer exceptions and questions bottlenecking in management for review. Fewer unhappy customers results in more happy employees.

Employees love to be productive. Empowering them to serve customers well is a large part of job satisfaction. Employees benefit by working for a company that can afford to pay a strong wage, invest in training, and provide other benefits.

3. Happy Competitors

I know you aren’t in business to help your competitors, but when every business focuses on its own niche, it creates strength in the industry.

First, when competing businesses focus on developing and adding value to their own niches instead of engaging in a price war, everybody wins because each business can operate efficiently, produce good value for their clients, and generate a profit.

Second, you may have heard the maxim, “A rising tide lifts all boats.” When a company thrives, it brings more people into its field of work. This strengthens the industry as a whole and, in turn, creates more opportunities for all companies who serve that industry.

4. Happy Owners

Clearly defining your market is part of a broader strategy that can reduce some of your headaches as an owner.

If you know what your market likes, you probably have a good idea of what it doesn’t like, too. As a result, you can decrease inventory and training costs by eliminating products and services your niche doesn’t value.

Serving a niche well increases your referrals, which can reduce your marketing costs and make selling easier. Improving your value proposition based on your niche makes it more difficult for competitors to claim your customers.

Knowing your niche market reduces your research and development costs because there is a smaller variation of customer preferences. Not only does it take less investment to make meaningful improvements, but when improvements are made, most customers benefit.

5. Happy Families

This may be the best benefit of all! Any business owner knows that a business can either take a toll or be a great blessing to his home life. Without the problems caused by trying to be all things to all people, a smoothly running business with a narrow niche focus gives us more time and energy to give to our families and friends or other pursuits.

A company that is performing well financially allows the owners to draw a sufficient salary to meet their family’s needs and experience the joy of sharing with others.

Is your business struggling to find customers? Do you keep bumping up against customer requests that you cannot effectively meet? Are your resources stretched too thin over a wide range of customers? If so, it’s time to develop your own market niche and start experiencing these benefits. Bon Voyage!

About the Author: Roy Herr is the senior marketing consultant at Rosewood Marketing. The Rosewood team guides business owners through marketing challenges into sustainable growth. Contact Roy at roy@rosewood.us.com