Should You Focus on a Target Market (Redux)?

Cy writes:

In developing a small web design business, should I identify a target niche early or wait until my business has started growing? Also, is it advisable to target 2-3 niche markets, or just one versus targeting “small businesses”?

Here is the reply:

First, good luck with your venture.

Second, please read the article on Sitepoint entitled World Domination for Small Web Businesses (http://www.sitepoint.com/article/small-web-businesses), which explains the importance of identifying a target niche market and how to do it. Read it now, before you read the answer to your questions.

Now, to the questions you asked that were not addressed in the article:

I suggest that you identify a target niche as early as you can. A good target niche is one that is large enough to sustain your business, reachable, has money to spend (and will spend it), and in which you have a good story to tell. You don’t have to be the only web designer targeting that niche, and probably don’t want to be because it is expensive to blaze a trail. At the same time, you don’t want the target niche to be saturated with competitors.

If you look in your local yellow pages, you will find literally hundreds of target markets that could use a focused web designer to serve them.

Having said that, practically speaking, lots of web designers resist focusing on a target market, and for valid reasons. Let me address those, as you have brought up one or two good points already.

One: “I don’t want to give up revenue from businesses outside my target market.”

If you are just starting out, it hurts to give up revenue by refusing business. Ideally, you would recognize the opportunity cost of taking business outside your target market. In other words, by spending time on a one-time gig outside your niche, you give up time that you could use to penetrate your true target market.

But realistically, who’s going to give up business when they first start out – especially if you need money and have the time? So a softer stance is to focus about 80% of your time on developing a presence in your target market. Allow 20% of your time for business that comes to you through referral and other channels, even if it is not in your target market. That way, you can earn revenue and grow your business. Who knows? By following this approach you might even find your next target market to dominate (when the time is right).

Two: “I want to target 2-3 markets at a time.”

It takes lots of work to target just one market as a web designer. You have to develop a focused marketing message, come up with a plan to get in front of prospects, and build a solution that focuses on your niche. Dominate one market first. Then move on to the next. A target market strategy doesn’t mean you focus exclusively on one market. It means you knock down one market at a time. See the book “Crossing the Chasm” by Moore for more on this approach.

Three: “What if my industry tanks? That’s one reason not to focus.”

No one is asking you to marry a target industry for life. It takes six to 12 months to get established in an industry. Do some research to make sure the industry isn’t currently tanking, or susceptible to a downturn soon. Accept 20% of your work from businesses outside of your target. And be ready to dominate another target market in a year or two. That way, you build a “diversified portfolio” of vertical markets and can protect yourself.

Four: “I don’t have 6 months to research an industry only to find out I was wrong.”

You don’t need 6 months. If you run your own business, you have enough experience to pick a target market in a week. Start with potential niches where you have already done good work. That way, you have contacts and a story to tell. Take a couple of people from the industry out to lunch and assess their needs and satisfaction with web design professionals that target their industry. Ask industry associations about publications (where you can write), meetings (where you can speak and network), industry size, trends, etc. You can do this in a week, two at the outside. You’ll never have complete information to eliminate all risk, so gather 60-80% of the information you need, and move forward.

Five: “I’ve lost business before to generalist firms because prospects thought I was too specialized.”

You won’t win every engagement when you focus. At the same time, it is up to you to understand your prospects’ criteria when you meet with them. If they express an interest in experience outside their own industry, then focus on your 20% of experience from outside the industry. Meanwhile, turn your competitors perceived strengths into weaknesses (e.g. “Yes, they have lots of experience outside the industry, and so do I. I also know your industry cold, so that you pay someone to learn your business language and requirements – and you don’t waste any time getting me up to speed”).

Six: “Web design is web design. It’s all the same, so why focus?”

Web design might be the same to you across industries, but it is not to your prospects. Prospects appreciate working with professionals who have experience in their industry and know their issues and language. In marketing as in politics, perception is reality.

Seven: “We’re doing fine as generalists.”

Good for you. Why not accelerate revenues by spiking in one target market, and see how much easier it is to establish a name for yourself. Do a test campaign to a specific industry, with targeted messages, a focused product, and tactics that reach that industry. Don’t take my word for it; do a test and find out for yourself.

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This entry was posted on Wednesday, April 28th, 2004 at 8:23 am, contains 1,057 words, 6 images, and is filed under Selling Web Design Services. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. The views and opinions in this blog post are those of its author.