No large and successful company achieved its status by initially targeting the entire industry or all customers in the marketplace. Entrepreneurs typically began with a narrower focus—either on a niche within the industry or on a specific subset of customers.
The most successful entrepreneurs are the ones who have a zealous focus on either an industry niche or a customer niche. They have been watching shifting trends and see a “small” opportunity to solve a problem for a select group of customers.
There are many advantages to focusing on a small niche market. First, there is instant feedback and potential revenue traction. Second, there is low initial competition. In addition, there are several other advantages that can be valuable to entrepreneurs.
Small customer base equals focus
One of the main benefits of starting a business in a niche market is the advantage of having a smaller customer base that has an identified problem. The good news is that you hardly need to do any marketing as the customers know they have a problem and are actively looking for a solution.
Differentiation right away
Some companies spend millions to differentiate their brand. By focusing on a niche and hyper-focusing on the product or service, you will differentiate the company immediately.
Gain insights on customer needs
What you learn from your initial set of niche customers is invaluable to your long-term survival. As an entrepreneur, you will get insights, learnings and are constantly making small pivots to better serve the customers. Guess who is not doing this? Your competition. Even if they finally wake up, it may take them years to learn what you have already learned. Netflix gained so many insights from studying and monitoring their DVD mail business that it propelled them when they shifted to streaming.
Less competitors
Another key benefit of starting a business with a focus on a niche market is that there are fewer competitors to face. When you focus on a specific and targeted group of customers, you are entering a market that may not have as much competition as a broader market.
Potential for higher profit margins
Usually, when you create a new product or service in a niche market, customers are willing to pay a slight premium to get their problem solved. So, you can charge more. That should help profitability and differentiate your brand.
Culled from: www.forbes.com
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