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Niche marketing and the 80/20 rule

by Brian Brown (follow me on Twitter): April 15, 2008


The 80/20 rule:

  • 80% of your profit comes from 20% of your products
  • 80% of your sales are obtained by 20% of your sales force
  • 80% of your time is spent dealing with 20% of your business
  • 80% of your hassles are caused by 20% of your employees (especially problematic if you are the sole proprietor)

Sound familiar? People like to talk about the 80/20 rule in business, as well as everyday life. I wonder how accurate that ratio really is? It certainly seems accurate, and barring a study from Princeton to the contrary, I'm willing to accept the 80/20 rule as a reality in business.

Nicche When it comes to niche marketing, I think the most important aspect of the 80/20 rule is that 80% of your profit is made by selling 20% of your products. There is usually one or two products that really shine, relative to the others.

The reason to bring up the 80/20 rule in the first place is to take another look at our products, make our top selling product even better, and stop wasting our time on the 80% of the products that aren't giving us nearly as good results.

80/20 rule in action
Take your product...hand carved chess pieces, for example. Even with a highly unique product such as this, there is probably an 80/20 rule that emerges with sales. It may be a certain type of wood, or certain size chess piece totally dominates your sales. The question is how to capitalize on this.

It's easy. If it's a certain type of wood, start using pieces made of that wood in all of your promotional material. Get it on your home page, your brochures, photos of it in your blog posts, just hammer all your materials with it. If it's a size that sells great, mention the benefits of that particular size, show photos of the pieces next to familiar objects so people really connect with the exact size of the piece.

Your customers know why they want the product better than you do
Maybe you don't know any benefits of that best-selling size. If not, you need to ask your customers, because there is some reason that particular size is dominating your sales.

This product is selling because it is fitting a niche. Your product may have competition and it may be selling better or worse than your competitor's product, but if it's selling at all, there are reasons in the mind of your customers to buy your product over another. If you can't decide what these reasons are (and very few people are gifted with mind reading talent), you have to actually ask the people who buy what you're selling. Follow up surveys are ideal for this purpose.

Don't hide the benefits
They may be buying simply because they are unaware your competitor is selling the same thing for $10 less. More likely is that there is something your product has that the other doesn't. Find out what it is and then YELL in your marketing about this benefit. This is your niche, the one thing that makes your product better or unique. Let everyone know this great thing as soon as they visit your website.

On top of that, find other ways to capitalize on this benefit. If you are selling a huge amount of cherry chess pieces, you certainly should be selling chess boards with cherry squares and offer a carrying case made of cherry as well. In fact, every year starting around September, that customer better be getting marketing material from you reminding them you have a cherry carrying case for the pieces they bought, and it might make a good Christmas present if they let their family know they want it.

The 80/20 rule is like a divining rod toward your niche. Small business people often start a business around a certain product, and then completely change their business when another product they've developed suddenly and surprisingly takes off. When this happens, regroup and focus on this winner.

[Photo: Massacre by daily dog at Flickr. Used with permission under creative commons copyright.]

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