There was a great article in the Financial Post a few months back about the importance of defining a target market when selling a product or service. An entrepreneur will sometimes try to sell a mass audience because their product or service is so ‘revolutionary’. There are several problems with this approach:
- You need a massive marketing budget to serve a massive market. A common rule in marketing is that an ad must be viewed up to 7 times before it induces a prospect to take action. Think of the costs involved in mailing a brochure to a million people….seven times. You can have a company website but you would still need to spend on traditional marketing (direct mail, advertising, etc.) to attract people to your website.
- For many reasons, you can’t charge as much for a product when targeting a mass audience. There is much more competition compared to a niche market (e.g. a regular garage compared to a specialty shop specializing in classic American cars). It is also much more difficult to communicate with your market let alone customize the marketing message. As a result, it is much easier to charge a premium when you are serving a niche market.
- The level of after-sale service is lower. This is pretty self-evident. When you are charging less and serving a big market, you can’t offer a very high level of service. You would likely opt for an online Frequently Asked Questions page instead of 24 hour live customer service.
You can identify a particular niche in several ways. It can be geographic in nature (e.g. high income families in the borough of Westmount). It can also be a specific consumer sector (e.g. people over the age of 50 who, by the way, represent 44% of the Canadian population and are also the most prosperous and heaviest spending). You can even target a particular sector of the business community (e.g. small businesses in the catering business with less than 10 employees).
With a fewer number of prospects, you can simplify your marketing message and better assess the needs of your customers. You can also afford to market more frequently, reinforcing your message while creating the multiple exposures needed to turn a prospect into a client.
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