Your customer persona is likely already pretty specific. Maybe your target market is young investors looking to climb the property ladder for the first time or even millennials wanting to break into the gold market. Either way, there’s already a set cluster of demographics you’re likely focused on.

Despite an already comprehensive customer persona, your industry’s market can be further divided into different segments depending on what characteristics consumers share, the age range they’re in or the industry they work in. This is called niching or finding commonalities in your consumers that will best benefit from your product or service.

Niching, like any other good business strategy, has its own pros and cons. You can be more targeted with your marketing because of niching, for example, but you also risk alienating other possible customers who may benefit from your product or service. 

Establishing your target market is incredibly important as it helps you avoid having to handle difficult customers and find ones that will find your product or service the most helpful. 

Market segmentation and niching is one way to try and refine the group of customers you’re trying to cater to and, depending on your time and resources, it can be a strategy that can work for you and your practice. 

What is market segmentation? 

Market segmentation groups together certain customers depending on how they respond to a product because of their demographics. You can segment your market by determining your customers’ age, gender or even geographical location. What age range would benefit most from your product or service? Where would it be the most useful? What hobbies do these people have? Answering these questions will help you determine what segment you need to focus on. 

There are five types of market segmentation: 

• Demographic – These include observable differences such as age, gender and occupation.
• Firmographic – This is more for B2B firms that are trying to find other practices that may benefit from their products or services. This includes industry, turnover and profit as well as ownership.
• Psychographic – These include details such as your target customer’s hobbies, values and life goals.
• Behavioural – This includes how people interact with your products or services or even their browsing habits. 
• Geographic – This includes where your customers live, how dense the population is and even what kind of neighbourhood they live in. 

Market segmentation helps businesses further define their target audience, leading them to try to be more relevant to those demographics (for example: if their audience is made up of young adults, they won’t be talking about outdated technology or concepts–market segmentation makes this possible). 

When it comes to niching, you deep dive into these specific market segments even further to find even more specific problems in an already defined audience. For example, if your target audience is men in their early 20s who love biking, niche it further by dissecting what kind of biking they like to do. This can include mountain biking or casual city strolls. Finding that specificity will help you hone in on a subset of people that will directly benefit from your firm. 

Niching and how it gives you the upper hand in your industry because you find even more specific qualities in your already specific target market that you can focus on. 

The pros and cons of niching your market segment

Niching your market comes with some pros and cons–here are just a few of them.

Pro: More loyal customers

Because you’re engaging with a smaller group/audience, you have the opportunity to really focus on your relationships with your clients and nurture them. 

Since your product or service stands out to them, there’s a higher chance of conversion and sales compared to someone who’s just casually browsing. People are seeking out this product or service and feel like they’re being taken care of since the market is smaller and you can really focus on deepening the relationship. 

Customer loyalty is crucial because it secures the potential of turning a one-time customer into a full-time brand advocate. 

Loyal customers: 

• Spread the word about your firm
• Are repeat customers
• Are more likely to provide feedback

Con: Much smaller market

Omitting other customers may be detrimental to your business because some people who fall out of your target demographics may actually benefit from your product or service. However, because they don’t fit your niche customer persona, they might not be getting information about you or what you offer. 

Niching your market segment naturally means downsizing and limiting it to an even smaller group. You may overlook a certain demographic while trying to further narrow down your scope. 

With a smaller market, it may be difficult to secure their attention right away and you’ll likely have less frequent sales while you’re still trying to grow your business. 

Pro: Less competition

With fewer competitors vying for the attention of a niche market, you are able to beat out broader marketing strategies and go straight for your audience. Broader marketing is often hit or miss because they don’t cater to one group and are less likely to catch the attention of an overly broad audience. 

Broader marketing from your competitors either means that they can’t serve your audience or their efforts aren’t as compelling as yours because you serve a direct solution whereas theirs is more general. 

Con: More difficult to grow

When you’re just beginning your business, you don’t have the social proof necessary to convince your audience that you’re trustworthy and that you’re the solution they need. Others may take a leap of faith to try it out, but that’s not always guaranteed. It is a little more difficult to grow, especially in the beginning, and with a small audience, it can be hard to expand. 

You need to earn the trust of your very niche audience because, if you provide a product or service that promises to serve them or offer them solutions and it doesn’t, not only do you waste a lot of time, energy and money, you also potentially can’t hook them in another time. 

Pro: Higher profit margins

Not only are you able to save money because you don’t have to double or even triple your efforts to mass market, but you also have a much higher conversion rate because a smaller audience means a more focused one looking for particular products or services or solutions to their problems. 

Specialised needs mean there aren’t as many businesses that offer what you do, which makes people more inclined to spend a little extra for what you offer.

While niching your market segment can seem risky, it pays to remember that many business decisions come with risk. Niching your market is still something worth doing, as it will likely do more good than harm and lead you to effectively manage your clients since they share plenty of similarities.

Niching your market segment may come at a bit of a risk but every business strategy has its own challenges. If you want to do it right, give us a call.