Starting out, many entrepreneurs try to cater to all markets because they’re afraid of limiting their potential for sales. Although entrepreneurs are usually encouraged to think big, when it comes to defining the nature of your business, thinking too big can be detrimental to your growth.
Trying to reach too many markets simultaneously could result in reaching none at all. The 2018 Real State of Entrepreneurship Survey states that 47% of the entrepreneurs surveyed said that they are engaged with Business to Business (B2B), Business to Consumer (B2C), and Business to Government (B2G) sales all at the same time. While a small portion of these entrepreneurs may be warranted in their all-encompassing market engagement, many are likely doing their business a disservice.
This just goes to show how important it is for up-and-coming business owners to realise that a bigger market doesn’t necessarily mean bigger sales. In reality, business owners who initially cast their customer net too wide can actually end up diluting business success.
This is because a small business needs to differentiate themselves from their competition – especially when first starting out. By defining your niche, you’re also forced to really understand every detail about your business offering (product or service), which includes its benefits and unique features, who can benefit from the product offering and what sets you apart from your competitors.
Once you know this, you should have a far better idea of who it is you are trying to sell to, which will allow you to be far more selective in your approach.
Here is a breakdown of the four core components involved in defining a business niche – the four Ps:
Once you know what differentiates your product or service offering, break down the type of person you think would be most likely to make use of your business in terms of age, lifestyle and interests. This is essentially the act of defining your target market.
Based on the defined target market, narrow down the area that you are going to sell or operate in by identifying specific locations you think will increase your chances of reaching these people. Will it be an online-only business, or will it require physical stores?
Another important thing to define is your price-point. This guides your marketing approach and overall business branding. You need to highlight whether you are offering a budget friendly alternative to something that already exists, or a luxury good that appeals to status.
This refers to the way you are going to go about selling your product or service. It is also important to consider whether there will be some kind of subscription option or rewards programme, as this can be a useful sales tactic, depending on the type of business model.