The saying goes that 20-percent of buyers consume 80-percent of your product volume. If we are to prove the saying true, we need to find out who the 20-percenters are and target our products directly at them. The 20-percenters are the niche market and as a small retailer, you need to dominate these markets in order to make a healthy profit. Let’s take a look at how you can do this.
Pay Attention to Secondary Data Sources
Most large companies already segment their customers into niche markets, so it stands to reason that as a small retailer, you should be doing the same thing. Rather than spend huge amounts of cash to figure out what niche markets you should be catering to, it might be a more prudent idea to check secondary data sources. These secondary sources could be industry experts, trade associations or even data that you gather on your own for things other than market research. An example of this type of data might be a sales report that is sub-ivided by each product line.
Copy the Competition
Another strategy that you can incorporate involves watching your key competitors. Remember the old saying “Keep your friends close and your enemies closer?” This is exactly what you should be doing. Keep an eye on what your competitors are doing when it comes to marketing and if it looks like it’s working, then copy them.
Create a Buzz
If you’re interested in creating buzz about a particular product that you’ll be introducing, be sure to talk with key trade buyers. Word of mouth will help sell your product to those 20-percenters we were talking about. It doesn’t hurt to do a needs analysis based on research that you conduct in-store with individuals or groups of customers. People who enjoy buying stuff are always happy to talk about the things that they want.
Do What the Big Companies Do
Search for secondary data in the same places that the large companies do. In most cases, you can get direct access to the same databases that huge corporations do. This data can be used to estimate the size of different market segments and how important they might be. Check in trade publications and association publications as well as with experts involved in these particular areas. You can also gain access to larger market research information through companies like Burk, Information Resources, Inc. and ACNielsen.
Segment, Segment, Segment
One final thing to keep in mind while you’re doing your research is that you can segment markets by geography, product life, distribution, packaging, price, sizes and other tangible elements that you know about your products.
Dominate the Competition
Okay, so you’ve figured out which market segments you’re going to attack and you have all the data you can handle. The next step is to figure out who’s trying to take your customers away from you. It’s important to identify who will be in direct competition with you before you make a final decision about which niche market to jump into. If you do this, you’ll be reducing risk, resources and expenses.
For example, you may have a new and unique shoe that you want to sell. Unfortunately, competing with every shoe retailer in a multi-billion dollar product category is monumentally difficult. Secondarily, if you narrow the market down to a single style of shoe, you may still be dealing with a billion dollar product category. However, if you target a specific niche, for instance one particular style of orthopedic men’s dress shoes, the market segment becomes smaller and much easier to break into with a new product.
Undercut the Competition
Once you’ve identified your competitors, it’s time to undercut them. Niche markets can be finicky and they may only be able to support one company in that niche. When pricing your product lower than your competitor, it’s important to be the first company that settles into this low-price area. It’s also important to have secondary sources of service and product differences with your competitors.
Position Your Product
A final way to dominate your niche is to provide a clear and targeted positioning message. You must position your product as unique and different from your competitor’s product. Examine what you offer against other products that your 20-percenters are buying. If there are no differences, create some. Secondly, position your product correctly with your target audience by solving the equation of product + advertising + price + distribution. If you get this mix right based on your research and how you differentiate your business and your product from your competition, you’ll dominate the niche market that you’ve chosen.