D&M 004: The Power of niche marketing and why it is so important to business success

DMPodcastCoverSummary:

  1. In this session of the Dan and Matt Podcast we discussed the importance of niche marketing and how it can pull you out of the everyday price war with competitors. This session is a powerful thought provoker that highlights exactly how to pull your business out of mediocrity.

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1.Free Video’s From Dan and Matt?-?https://www.danandmatt.com/free

Transcript:

Matt: Hi and welcome to danandmatt.com. Today we’re going to be discussing the important topic of finding your niche market and to help you understand why it is that important to your business success. Again, I have with me, Daniele Lima.

Dan: Good morning everyone.

Matt: And as it is our fourth episode, I’d like to take this opportunity to thank everybody for listening to us and if you are starting, if this is your first episode, I appreciate you spending time with us today. So Daniele, before we get into specifically why niche marketing is so important, I guess I’d like to first discuss why so many businesses go broke because they don’t understand the importance of finding their own niche.

Dan: Yeah, look Matt it’s a critical question that you’ve asked and tragically as you’ve alluded there, it’s really one of the root causes why so many, especially SME’s, the smaller businesses with let’s say under 200 people employed go out of business. And it’s essentially, the thinking is that I suspect that, “The market is big, so why don’t we go after the whole thing? We’ll have a bigger chance of success if we don’t limit who we’re going after.” I suspect that’s part of the thinking behind not niching and not segmenting a market, breaking it up and targeting bits of that market. I suspect that’s the thinking that underpins that process.

Matt: So Daniele, why do you think it’s the wrong tact to be taking? I mean the market is big, which means there’s lots of customers out there. Why wouldn’t we target them all?

Dan: Yeah again a great question and I think essentially the key point that we’ve got to make to the listeners Matt is that even though the market is huge, depending on whichever market we’re talking about, the needs within that overall market are quite different from segment to segment and to do a mass marketing approach, it assumes one very, very important thing. That the need is pretty consistent across all the people in that market. Now that can work if you’re Coca Cola, because most people like a refreshing cold soda or soft drink. But very few products can be mass marketed like that to the masses. And that’s the fundamental flaw in mass marketing. That the needs for people within the overall market aren’t the same. That they can be quite different in different niches. So what ends up happening Matt, as you know is that the company tries to put out one message to the whole market and unfortunately the message is lost because it really doesn’t fit anyone’s exact need.

Matt: Look, I agree with you, I mean as Daniele you know and some of our listeners who are aware of my experience. I’ve worked with numerous different types of businesses. Everything from telecommunications to education. And most people that I speak to when I first start in those different industries will continually tell me that whatever has been thought of is all that can be thought of. Because, especially in education, there are some really educated people working in that industry. So of course anything that could potentially create a huge market must have already been done. And it doesn’t take much time to be able to explore the entire market terrain and say, “There is a group of people over here that are currently not being serviced in the way that they want.” Or, “Currently one brand is stretching out to that market for lack of a better option. Where all of a sudden, I can capture an entire market and have no competition, just by saying, “I will offer the services and the products that you request specifically for you, tailored specifically to your industry group.

Dan: Yeah, spot on. Absolutely, and those firms that do that invariably achieve a higher level of success and awareness within the market, greater retention of customers, greater loyalty and ultimately greater advocacy. Because those people not only use it, but they end up telling their connections and networks about you.

Matt: Well it makes sense that they would do that too. Because if they’re currently not being serviced by the other industry leaders, when they find a product or service that actually does suit their needs, they are generally through group think, talking to lots of individuals in their industry that are experiencing the same problems. So it creates it’s own self-propelling marketing proposition as opposed to having to continually look for customers. And I’m continually approached by people that are saying, “I, my product fits everybody. Everybody should have my product, yet I don’t have any customers.” And when we look at it, the reason why they don’t have any customers is because they believe that their product works for everybody, just like every other product in that marketplace. And as a by-product of that, they don’t get any customers because they speak to everybody but they speak to no one specifically. And as a result of that, their market reach is so broad that they don’t, no specific customer identifies with their brand and as a result, nobody is heroing their cause to their friends, their family members and their business connections.

Dan: And I think it’s a great point because remember when someone actually, and I’ll throw in a couple of stats here Matt. We’re told by the latest researchers that on average, the average person you’re going to meet in the street today is a member of three social media networks and generally these networks have somewhere between 120 and 150 people on them who are your members. Now I think Facebook’s about 140 on average, Twitter’s just marginally below that at about 120. So essentially most people that you bump into in the street, they’re gonna have about 400 connections that they’ve got. Perhaps they’re on LinkedIn or any other number of tremendously powerful platforms. But the thing is, regardless of how many networks you’re on or how many people you’re connected to, we’re all very proud of the credibility that we have within our network. So we’re not going to promote anything to anyone unless we really believe it’s a good thing. So if we take a step back to what you just said a moment ago, that someone who’s trying to target everyone is basically putting a product out there that doesn’t perfectly fit anyone. Then no one’s going to risk their credibility talking about that.

Matt: That’s exactly right and if you don’t have a group of people that identify with you and champion your cause and offer you referrals. I mean, every business I speak to says they get 90% of their business from referrals these days. Because developing new markets is not only expensive, it’s time consuming. And so as a result they get most of their business from referrals. However they spend no time understanding who their current customers are, what specific niches those people are from and using that information to build their differentiator to continually have those people champion their cause and bring other people within that niche to their cause. I mean, I’ve seen businesses just for instance, business book writers. Both Dan and I are working with a ghost-writer at the moment. And he wanted to offer books for every single type of industry, yet he specialised specifically in one, and as a result of trying to keep it broad because he needed customers, he actually disqualified all of the people that were looking for a person that specialised in what he did. So let’s say, and hypothetically ’cause obviously I won’t divulge names, but let’s say hypothetically he was very, very good in technology, in the technology industry and a great ghost writer for technology. He had people for all sorts of things, including astronomy or physics or mathematics people that wanted to write their own books. And the technological people have said, looking at his website saying, “Well you know, perhaps not for me because I really need a specialist.” Because he was trying to suit a whole broad spectrum. And as a result of finding that pure niche, I mean it didn’t take as much Daniel? We just changed a few things and all of a sudden his entire website and his business just improved. He was getting the customers that he wanted, that he preferred to work with and he was championing a higher income. Just as a result of saying, “Well I specialise in this, if you want a specialist, you need to pay premium.

Dan: Yeah and you make a great point there Matt, that really it’s about what is your defined area of excellence? Because people want to know that they’re getting someone who is first rate at that thing they need. So, it’s that thing of ok, what is my positioning in the market? What do I want people to associate me with? I want them to associate me with excellence in the following area dot, dot and now fill in that space. So I want everyone as I say that to think, “Ok, what is my area of excellence?” Write it down and then ask yourself, “Am I actively targeting this group? Or does that group not realise that I am the perfect solution for them?

Matt: And look, a lot of times people say to me when we run through this exercise Daniele, their response is, “But I like serving everybody and I have all different types of customers.” Generally when you do a survey of your customers, and Survey Monkey’s a great way to do this. You can send an email out to your clients. If you were to send an email out, you can find out the demographics of your customers. And I think most people will be surprised. There is always a larger group of customers from one specific area and by changing your marketing – obviously you’re not gonna lose the customers you’ve already got. Those people have already done their due diligence and chosen you as a service provider. But a simple landing page, or a simple brochure that specialises directly into the market that you want, and then asking people in that industry to champion you because you now have a specifically tailored product to that industry. Will always bring in additional customers from areas that you would not normally be expected. And if you have a larger group of customers in one specific area, when you find those customers and have them approaching you or you start approaching them, you’ll have a higher closure rate on every single sale.

Dan: No I totally agree with that. And you and I have been around for many years Matt and we know that this information we’re providing today, this isn’t theory. What we have seen this, in real world application countless times, and we just know that it works. So for anyone out there who’s thinking, “Yeah, yeah whatever. I’m still just going to keep doing what I’m doing. You are costing yourself serious business by not positioning yourself and really establishing that area of excellence.

Matt: The other thing is that you’re losing money on every sale because when you’re competing with everybody, in a market that everybody is in, you have to compete on price. It’s the only differentiator between you. Because you’re all stock standard, it’s like going into Target to buy a notebook. There’s lots of different types of notebooks out there, price – yeah everyone’s just looking for the cheapest one, because what differentiator really is there in a notebook? The last thing you want to be doing is being a business coach, being a ghost writer, being a producer of internet based products online that is the exact same as everybody else. Because if you do that, you have to compete on price. And if you’re competing on price, it’s a poor race to the bottom for every single person involved in that. And we’ve seen that in the pizza industry where you used to be able to buy a pizza for $20 and get a pretty good pizza. Then, all of a sudden it was $19 and then it was $18. Now we’re seeing pizzas for $4.95. Sometimes you even buy one pizza for $4.95, get the other one for a dollar. No one wins, because – it’s broken open the world of gourmet pizzas, because people decided that, “Yeah ok, we now want specialty pizzas.” And the first people that came out with gourmet said, “I want to be in the pizza market but I don’t want to be in the pizza market where everybody is in the pizza market where price is important. So I’m going to go back to offering gourmet pizzas.” Which the market ate up because why wouldn’t you want a gourmet pizza? You want a pizza that tastes like a pizza like you used to have.

Dan: And Matt, I tell you as you’re saying what you’ve just said there, so many thoughts have just gone through my mind on pricing strategy and if I can lay a seed, that I think in the not too distant future, we should do a podcast on pricing strategies to help people who find themselves in these really un-winnable downward spirals of pricing.

Matt: Look, you’re right Daniele, I think that would really help and actually I’ll put that out to the listeners like we always do. If this is something that you’re interested in and you find yourself constantly having to mark down your price to keep customers, and you’d like that to change, send us an email or put the information down on the “contact us” page. Which is on the danandmatt.com website, and just specify that you’re having that problem and if you can give us a quick example, on the podcast, we’ll be able to give you some specific examples.

Obviously not mentioning your name of course. That may actually help, unless you ask us to which a lot of people do. We will speak ?towards specifically your problems and see whether or not we can come up with some ideas as Dan and I as experts in the field, of how we can differentiate you, help you find your niche so that you can obviously go out and not be in that pricing war. And it is the most important thing to any business, is to not have to compete on price. Every single product I have ever been involved in has always had cheaper products in the market and they’ve never been an issue to us. And the reason why they’ve never been an issue to us is when a customer puts the two brochures next to each other, they look at it and say, “Yeah, but this one’s specific to my industry.” Or, “Yeah but this one seems a lot more tailored to my specific needs.” And as a result of that, you don’t have to compete on price. People will pay a premium if they know that the user experience is going to be better or the customer experience is going to be better. They don’t like having to call customer service and explain specifically their industry. I know a business coach in Australia that works a lot with retailers and he works with the retail associations and that sort of thing. And when he’s selling a specific sales product, he specifically talks and works with the retail. Not because his product doesn’t fit anyone else, it just – he’s worked with that niche and the niche works really well for him. And by doing that, he seems to have much less – well he does have much less competition because people that are offering mass market sales and marketing programs, it just doesn’t work as well. And when we looked at what we were going to do in sales and marketing for our Dan and Matt podcast – also offers on our Dan and Matt website, we offer a ten part DVD series. And when we looked at how we were going to sell our product, we could say, “We focus in sales and marketing,” and just leave it as open as that. But what we did, is we said, “Well we want to help small to medium businesses find a niche and understand a niche.

In a way that both on an offline basis – sorry, an off net internet basis, and an online basis. They could specifically find that niche to target. And then obviously combine in, “How do I then sell to that niche on the back end?” And we focused within the SME’s that have got a built product already that they want to market. Or people that had an idea of a product but had no idea how to sell it, so hadn’t even started a business. So by understanding the niche that we wanted to work with, we’ve put a product up there, we’ve specifically targeted it towards a certain group of people. And when we speak to people in that group of, in that demographic, we know it’s exactly what they want. We don’t have to make it sound like it fits them specifically. And that’s what happens a lot of times. A lot of people have a product and they say, “Oh and it will suit you because of this, this, this and this. But they’re really just stretching the boundaries of the product to fit every single person as I guess differentiated to them. Where, what we’ve decided and what most successful businesses do, is they say, “We have a product that we want to fit a specific group of people and we will talk to that group of people to sell the product, rather than stretching it to everybody.”

Dan: Yeah agree. And Matt, while you’re talking about the website, it’s probably an opportune moment just to remind people that if they go there, the first workshop of course, we’d encourage them to go and hear it as a free service.

Matt: Well yeah, Dan we’ve actually got – I think we both agreed and we’ve created a separate page. Which is danandmatt.com/free. And on that, there’ll be an introductory video where I’m just introducing you to the program. And there’ll be two specific videos on there that have got a combined value of $94. And what those two videos do is they provide a complete explanation of the importance of finding a niche and the first steps in how to do that. And the second video is talking about the common topic, which we’ll talk about in one of our future podcasts, which is – most people see themselves as not natural sales people. And we discuss completely that I was never a natural born sales person and as a result of learning the steps, the strategies and the processes towards sales, I became – if you like, and I’m not a big fan of the word – a sales guru. And all it was is learning the exact way of scripting a sale, and we cover off on that in a free video as well. So feel free to hop on that website. As I said, the content is completely free. I mean, obviously it is part of a greater program, however there’s no obligation to buy that, obviously you just listen to the first two videos and that will give you a lot of core business advice that you can apply directly to your business. And we’re very excited about it aren’t we Daniele?

Dan: Oh look, there’s nothing better than all the feedback we’re getting from people and the written emails. It’s really, and I know you get a huge buzz out of it as well as do I.

Matt: Definitely.

Dan: And it’s all good. And I was going to say Matt, I’m just chomping at the bit here to provide a little bit of structure around this discussion in terms of – we’ve talked about the need to find the niche and to really get a core message that resonates with that niche. And perhaps what we can talk about now, some of the pillars that go into setting up how we find this niche.

Matt: Sure Daniele, I think would be incredibly helpful for the listeners.

Dan: Yeah, and I think Matt that the key criteria for segmenting any market, and this is the beauty of this Matt, and you and I – I’ve lost count as to how many markets we’ve worked in individually and collectively. But regardless of which market you’re in, you can segment them using demographics, which is probably the most common way of breaking up a market. And by demographics of course, we’re describing the market. Is it men or women? How old are the people we’re targeting by age? What’s the level of income? What culture are they from? Are they married or single, divorced? What’s their stage of the family life cycle? What’s their level of education etc? So using ?demographics,

Matt, we can describe who that target audience is that we’re trying to reach with our core message. And it’s a, probably the most common way of breaking up any market.

Matt: And look, it’s a wonderful way of understanding your current customers as well. For anyone that’s got a small business, then you probably know your customers quite more intimately and you’ll be able to fill in those gaps to understand. For people that have got larger businesses, Survey Monkey or you may have, well hopefully have already been collecting that data. And those specific points will allow you to really get a good understanding of who buys from you. And as a result, perhaps if you’re looking at advertising or marketing, who to really tailor that marketing and advertising for?

Dan: Yeah perfect. And as well as demographics Matt, there are three other very important types of dimensions that help us break up a market. The first one’s geography. Now, geography could be where you live, it could be where you work, it could be where you’re planning to travel to etc. – so, geographies very, very important. And the final two are psycho-graphics, which essentially is how you feel about something. Your views, your attitudes, your belief systems. And you can see that that would be very important in terms of how people feel about different issues. And the third point is usage. Are you a frequent user? Are you a non-user of a product but you have potential to use it? Are you a user but very infrequent? So again, we can use usage patterns as a way of segmenting the market.

Matt: And again, I can’t stress enough understanding who your customers are gives you, not only the ability to be able to talk to other people about who you specialise and work with. Because as soon as you have a greater demographic of one group of people working and buying from you, all of a sudden you then have a demographic that you specialise in. And you can speak to specific customers then, or specific customer groups. Not only that, knowing this information gives you an absolute short cut into understanding who is your greatest profitability sector. And sometimes businesses especially that aren’t profiting, they’ll – or having customers that are quite difficult, you’ll also learn what customer groups to avoid, because they’re not only not profitable for you, the additional customer service can make you a loss. And I know specifically that there are a few electrical companies that I’ve worked with and gas companies that do servicing for – they used to do servicing for second hand products and fixing second hand appliances. And once we did this, they realised when they attached it to profitably for those customer groups, they realised that within a certain age group, a lot of the phone calls that they were getting were about servicing and fixing appliances as opposed to coming in and replacing new products, where their profitability was high. And they stopped marketing to those groups and increased the marketing to other groups. And as a result, their profitability went up and what they realised was even though they were getting lots of customers and I mean, there are a lot of other things including financial planning to understand that those customers, they were the dog customers they should have got rid of. However, by doing this, they realised they were actually losing money off a whole group, a segment of customers.

So it’s not only understanding which segments you specialise in and which segments you do most of. Understand the profitability that’s behind each one of these customers, because you may be surprised that the group that is 30 or 40% of your market, may actually be your most profitable one. And the one that’s 50 or 60% of your market may actually be making you a loss or using up all of your time for very little profit. Then when allocated towards your profitable tasks could make you a lot lot more.

Dan: Yeah absolutely and at very least in that scenario Matt, you should at very least start putting your prices up for that segment that’s costing you money. So those customers will either pay you more or leave.

Matt: Exactly.

Dan: And either way, it’s going to be a bonus for you. It’s just sort of analysis that really starts getting you on the right foot.

Matt: Oh look Daniele, I’m with you and it’s funny, we always speak with the same mind, but the advice was to charge for a service call, an additional service call for second hand fixing. To cover the fact that they may or may not decide to actually do the service, because they may want somebody just to repair it, and that covered the additional expenses of going out there for somebody. Because everyone knows if somebody wants the installation of a new one, you’re getting called out to do the job. If it’s somebody wanting a second hand one fixed, sometimes they want a quote, they want a couple of additional quotes.

So increasing a call out fee to make sure that that was in line with, “Ok, they obviously do want it fixed, and if I’m there and they say no, I’ve still made enough to cover costs.” That worked for them, but again, the decision that they made was to keep it, however some people may say, “Well no, I’ve only got,” – it’s very hard to train good staff and that sort of thing to fix appliances. Where it’s very easy to train people to install appliances, certain people may decide, you know what, “I’ve got three staff, increase a bit of marketing, get a bit more business, move away from the harder stuff and we’ll make more profit. Because if my guys are running around town, fixing things that we’re not making that much money out of, it’s actually better to just make more money, and even if we’re twiddling our thumbs a little bit more, to be available for those couple of extra jobs that are making us more money, actually is better than being flat out and not being able to fit those jobs in.”

Dan: Yeah, totally agree.

Matt: Perfect.

Dan: Totally agree.

Matt: Well Daniele, I think – I’m just looking at the time, we’re almost onto 30 minutes, is there anything else you’d like to add?

Dan: Well just very quickly, I was going to just give a very broad example to qualify those dimensions that we’ve told the listeners about today. And just very quickly, if we take a real world example of hotels. And we all stay in hotels whilst we’re travelling and imagine if we were talking about the Hyatt as opposed to the Marriot. And you could put yourself in the place of the Hyatt management. And let’s say that obviously one is the competitor of the other, and if we looked at usage for example, we could say, “Ok, we’re gonna target people who use these hotels versus those who don’t.” Then we could say, “Ok, we’re looking at people who currently use hotels.” We could look at things like frequency, how often do they use the hotel? Is it weekly, monthly, annually, are they a frequent user or not a frequent user? Geographically, where do they use it? Do they use it within their own city? Do they use it within their own state? Do they use it nationally? Again, great way to segment. What about psychographics Matt? What are the attitudes? Is it to do with taking your wife or your fianc? for a romantic weekend occasionally? Do people see hotels as a way of getting away for a weekend to literally decompress from a stressful job? Are they using the hotel for business, as a specific function etc.? And from a demographic point of view, the what – describe that person. What level of income do they have? What level of education do they have? What level of disposable income do they have? How old are they? What’s their family cycle in terms of – are they married, single, divorced etc? So you can see that in a very well-known example of hotels, how providing those four simple criteria to break up a market, you can literally come up with dozens of niches. And of course, the hotels do this really well, Matt where they provide different packages within each of their lines of hotels to target each of these groups. And I just wanted to put that example out there for people so they could literally see those dimensions being used in a real world setting.

Matt: Yeah definitely, I think that’s really helpful. I’ve seen a lot of hotels myself that some people offer romantic packages, other people offer party packages for 20-30 year olds. They really just spent the time and the money understanding who their customer demographic is so they’re not wasting their time handling customer service calls, which are hugely expensive. To deal with explaining what they’re for or even worse, paying money in marketing to get no calls, because they’ve targeted or they’ve just approached customers the wrong way.

Dan: Absolutely.

Matt: Perfect. Well thank you for putting that information in Daniel, I think that was really helpful for the listeners.

Dan: Yeah, it’s all about applying it isn’t it? And if nothing else, we’re gonna keep focusing these podcasts on very industry specific actionable information. And I know that’s our focus as we move forward.

Matt: Definitely, definitely. And in closing, I would challenge every single person listening to this podcast today to, before our next episode to have found their niche and feel comfortable with their niche and start marketing towards their niche. And I’d love to hear some replies on how those niches that they found surprised them and how by targeting and marketing to those people they really achieved some substantial success that they may not have thought possible before.

Dan: Absolutely.

Matt: On that, I’d really like to thank you again Daniele for having this chat with me today.

Dan: It was a pleasure.

Matt: And I’d like to thank all of our listeners again for their time that they spent with us today, our fourth podcast. And again, please if you have any questions or anything you feel like you would love us to talk about hop on danandmatt.com, go to the contact us page and list your request. Also, the danandmatt.com/free is available for those videos for you. And you can also find us on Facebook under Dan and Matt. You can also find us on Twitter under @danandmatthew. So feel free to contact us on any of those contents, and we look forward to speaking to you next time on our fifth episode.

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