The Value Of Niche Marketing

If you want to learn how effective Niche Marketing can be, I suggest you “don’t” take the route I did. Back in 1983 I started a company offering general Electronics Subcontract Assembly services to just about anyone who made Electronic products.

By 1985 my company was teetering on the brink of bankruptcy and I was perilously close to losing my home because of a large overdraft pledged against it.

Why did this happen?

Well Electronics Subcontract Assembly is a huge, highly competitive market place with lots of heavy hitters. Being a little naive at the time, I thought that my little three man company could carve out a big enough slice from such a huge market to make a very comfortable living – I was dead wrong.

We did get work, but only the jobs the big boys didn’t want. The work was labour intensive and even with our tiny overhead we couldn’t make enough profit to sustain the business adequately. We could never get the big, lucrative contracts because we weren’t considered big enough to handle them.

By December ’84 I was desperate. Sales for the previous four months had been abysmal and cashflow almost non-existent. My Bank Manager was on my back demanding that I reduce the business overdraft or he would call it in. My suppliers were baying at my door to be paid. As if that wasn’t bad enough, during the first week of 1985 my biggest customer suspended production for six months on a games gizmo we were making for him.

Things were so bad I was seriously considering bankruptcy to get out from under this financial nightmare. Fortunately I’m a bit pig headed about giving in too easily so despite all the problems I hung on, and I’m glad I did because fortune suddenly smiled on me.

What happened?

A couple of weeks into 1985 a business acquaintance came to see us with a sample cable and asked if we could make 5 up for him. The cable was for an IBM PC. At the time I knew nothing about making cables and even less about PCs, but I had his sample to work from so I took the job.

When our now customer came to collect his finished order, he mentioned that there were a few other Dealers in the PC market who would probably be interested in having us supply them with these cables – he even gave us a mailing list.

I was more than a little sceptical, I have to admit, but I had nothing to lose so I went for it. I wrote a short, snappy sales letter, scraped together the money, mailed out to the 100+ dealers on the list and crossed my fingers.

48 hours later we had our first order for 10 cables, within 7 days we had 11 more orders for 10 cables each.

That one small mailing brought us an amazing 12% initial response – and it just kept going from there with week after week of repeat orders.

Pretty soon after that, my wife Maxine joined the business and set up a telephone sales desk and customer service system. By that time we were averaging about £1000 a week and that was from just the one cable type.

At that point I dumped the subcontract work and focussed on the cable business.

Once Maxine took over the sales function she immediately followed up with the companies who hadn’t responded to our initial mailing. That brought in another 26 new customers. Within six months we were supplying most of the major Dealers and Distributors in the then burgeoning PC market and our cable sales had quadrupled.

Inside a year in this niche business we were selling thousands of computer cables of all descriptions, including highly lucrative custom formats, and we were being asked to provide advice on how to design cables for specific applications – we had arrived – we were now the acknowledged experts – customer loyalty rocketed and by 1988 our turnover reached £400,000+ with gross profits of 50% or more.

Now I’m the first to admit that luck played a hand in turning my company’s fortunes around, but the experience taught me my most valuable lesson in business – you have to focus on a specific, under-served market niche if you want to be really successful in business.

I have applied this premise to four other businesses since then and, with one exception, all have been successful.

My advice? Find yourself a small, focused market niche (the Internet is full of them) where you can carve a reputation for yourself and become an expert in the field – like I did.

Source: André Anthony

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