How Niching Down Can Boost Growth & Retention

How to Narrow Down Your Niche and Why It Can Boost Growth

Key points

  1. By focusing on a specific area, you can become an expert in that area and provide better value to clients.
  2. By identifying your ideal customer, you can tailor your services to their specific needs and preferences.
  3. By targeting a specific market, you can differentiate yourself from competitors, charge premium prices, and develop deeper relationships with your clients.

Countless entrepreneurs running agencies are struggling to find their purpose in a sea of competitors. Those who decide to niche down have most likely discovered their business strengths, and are focusing their energy on those services.

Glancing at a few agencies’ websites, it’s clear that many haven’t decided to niche down yet. They are trying to please everyone with their full-service-offering:

“From web design, to development, to SEO and content marketing, we have all your business needs covered.”

“We’ve worked with small and mid-size businesses as well as corporations and Fortune 500 companies.”

“We’re a full-service agency with experience working in a variety of industries from healthcare and real estate to B2B and technology.”

The problem should be evident: if you offer services that cover every aspect of SEO, for instance, you might not be an expert. Why should a potential client hire you for link building if there are agencies specializing in that niche?

There’s a lot of misunderstanding and friction when it comes to niching in the agency world. I’ll demonstrate with five simple reasons why every agency should at least think about niching down.

Let’s get started with our guide on how agencies and other service providers can niche down in order to get more clients by positioning their offerings in the best way possible.

What is a niche?

Your niche refers to your market segment, or the place in the market your product or service specifically targets. Choosing to niche down will help your brand to become known for what you do, helping you to stand out from your competition. From something generic and vague like content marketing to something specific like web development for WooCommerce and Shopify, your niche can be pretty much anything that you decide to offer your services to. As you’ll see throughout the article, the more defined your niche is, the better.

What does it mean to niche down?

Niching down is a strategy that focuses on finding a market segment that you can offer specific services or products to. Since you know your ideal customer, it’s easier and cheaper to sell to them.

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Positioning yourself in a specific niche can be a powerful strategy, as seen in the success of SMG. We chatted with Jonathan Solorzano from SMG, a web development agency, about how niching down and focusing on WooCommerce and Shopify products changed this web dev agency. It allowed SMG to become the go-to agency for specific WooCommerce and Shopify maintenance and features. Clients who choose to work with SMG are already aware of their expertise.

Another agency that uses niche positioning well is Guest Hook. This specialized copywriting agency is targeted towards the short-term vacation rental industry. Guest Hook positions itself as the expert of helping rental owners to maximize their profits. It’s a winning formula that has helped the company solidify their position as a market leader. They rely on SPP for its custom order forms, intake forms, and support ticket system, all of which have helped improve their customers’ onboarding experience.

gusthook process flow

You can use niche positioning to grow a loyal audience for your products. This tactic can help you identify your demographics pain points and provide a tailored solution that works for them. Throughout the guide, we’ll use these two examples to illustrate what a successful process of niching down generally entails.

The hypocrisy of agencies

Many agencies preach the story of niching down without applying it themselves. They ask prospects or clients about their target audience. If the client says something like, “Oh, we target everybody,” they start explaining how much money they’re leaving on the table.

“How can you expect us to reach your audience if you’re not clear on whom you’re targeting?!” they exclaim. Ask them that very same question and the answer might surprise you, because most won’t be able to respond.

We admit it’s a smart thing to do, yet we fail to apply it ourselves. That’s not the case for everybody, but if you haven’t done it until now, you know you should consider it. Here are the not-so-obvious reasons why.

Niche down, and practice what you preach

Successful agency’s niche down early. Some of them do it from day one because their founders are industry experts, others do it at a later stage.

The sooner you decide to focus on a specific service offering, the easier it is to

  • explain your business to prospects,

  • position yourself as an industry expert, and

  • find leads that are looking for your services.

Let’s look at a few reasons why you’d want to niche down.

Reason #1: You will grow faster

If you niche down your business today, you could end up making less money during the first years. However, keep the long-term effects in mind.

Here’s what might happen if you niche down now:

  • You start marketing to a particular niche.

  • Projects that don’t fit your criteria are turned down, or you need to end your relationships with previous clients. A drop in revenue is expected.

  • Little by little, your agency starts to get known as the “X agency for Y” which increases your credibility.

  • At the same time, this gives you the ability to charge above average rates.

  • The increased prices and reputability make your agency more referable in the long run.

What you’ll start profiting from is word of mouth from happy clients. Once you find your ideal clients, they’ll refer you to leads in the same industry with similar characteristics.

As the saying goes, “Birds of a feather flock together.”

While revenue could decelerate for a bit, your year-over-year growth is likely to be higher. This will shape your agency’s growth from a linear to an exponential construct.

And before you know it, you have left the generalist agencies way behind.

Reason #2: It will start to click

Let’s say you are a designer who creates book covers. It’s clear how to find your target group. If you’ve productized your offering, you are most likely working for self-published authors. You can even go one step further and focus on a specific genre, such as science fiction, or young adult fantasy.

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Next, research authors and do outreach. The successful ones have their own website–it’s easy to reach out to them. Those who are getting started linger in Facebook groups, forums, Reddit, and Quora.

Another way to approach them is with an inbound strategy. There are countless popular blogs and podcasts for you to participate in. You can start your own blog and target your ideal customer with search engine optimized blog posts. Or you re-target them with Facebook ads.

Filling your funnel with ideal leads is much easier once you know who you need to target. Niching down also helps you scale your agency by knowing who you need to hire. It all starts to click: marketing, HR, sales. You get clear about your entire strategy and in business–clarity is power.

Reason #3: Efficiency is profitability

Once you start focusing on the same tasks, you’ll become an expert in doing them. Not only will you do them faster, you’ll find new ways to make your process more efficient.

Instead of struggling to keep track of multiple tools, you can use our all-in-one client management & billing software.

SPP service order page client portal

You can

  • capture leads with custom contact forms,

  • allow existing clients to place orders via their client portal,

  • manage all your orders from one place, and

  • turn leads into clients.

In a business that depends heavily on people’s time, efficiency is correlated to profitability. Less variety combined with just one tool everyone needs to use means employees and contractors can learn faster.

On the other hand, having a wide variety of services and target markets distracts your team. They’ll have to study your documentation and learn things from scratch before they can work efficiently.

Narrow down your focus. That’s how you’ll break through the embarrassing profit margins some agencies make. Build a business that delivers higher profits instead of more problems.

Reason #4: You’ll attract your ideal customer

Many agencies can’t scale their business because they are attracting the wrong clients. Do wrong clients exist? They sure do for productized agencies!

Those clients are not the right fit for you because they ask you to do things you are unprepared for. You might not want to turn them away, but it would help you in the long run.

Another often overlooked opportunity in attracting the right client lies in your abilities to read their mind. Ideally, you’ll have researched buyer personas and know exactly who your ideal customer is. If you know who they are, you’ll also know how to market your services to them.

If you niche down, you’ll reduce the possibility of unfit clients ever finding you. If you are still not convinced, maybe the last reason will nudge you in the right direction.

Reason #5: Clients become case studies

Social proof is a handy way to convince even the most skeptical lead of your qualities. When you narrow down your efforts to a particular industry, you start building a collection of case studies and testimonials. You can display those on your website, or communicate them during your sales efforts.

Case studies have another advantage: they are a great way of building relationships with your clients that go beyond a simple client-service-provider relationship. You are not the only one benefiting from a case study as a marketing and social proof tool. The client will do everything they can to promote it in their channels (blog, newsletters, social media).

Besides case studies, you can use testimonials from happy clients. A short one-liner placed in your SPP order form template during checkout can do wonders for your conversion rate:

SPP order form testimonials

There are many other places you can integrate your testimonials thanks to our client template editing option.

You don’t need to marry your niche

One often misunderstood point when agencies are told to niche down: picking a specialty is not a decision set in stone.

You can pick it, test it, change it, flip it. Ten times in the next month if you want to. Focusing your agency on a niche doesn’t mean you’ll turn down all the projects that fall outside of it. You also won’t let go all of your clients tomorrow.

Don’t even change your website unless you have the possibility to do a proper A/B test. Instead, build a lead generation landing page with an offer to a particular niche, and run paid traffic/ads to it.

Think of niching down in terms of funnels. That is, niche your funnels, not your agency. Thinking about it from this perspective makes the decision to do it less painful. If things go well, years down the road, you can easily start to expand to other markets, just like startups do.

Business behemoths like Facebook and Amazon started within a niche—Harvard students and book readers, respectively.

What would happen if a startup tried to model what Amazon or Facebook is today from the get-go? It’s the same when young agencies want to be like the big boys, and target everybody from day one.

How to niche down

Now that we’ve seen the benefits of niching down, it’s time to explore how you can niche down: the main goal will be to find your ideal customer and target them directly, offer a product or service that solves their problem, and focusing on a specific market that isn’t too broad.

Let’s take a closer look at each step.

1. Target your ideal customer

Who is experiencing the problem your product aims to solve? The more targeted you are, the better. For example, if you’re an agency that offers general web development services, you’re placing yourself directly in competition with many other agencies serving similar services.

However, if you follow Jonathan Solarno and decide to tailor your services to a specific market, like he does with SMG and the Shopify and WooCommerce markets, you’ll be able to distinguish yourself as the expert.

It’s a formula that works–SMG is seen as the go-to web development agency for business owners looking for Shopify and WooCommerce solutions. Often, their leads are already qualified prior to filling in the contact information, as they turn to SMG to solve a specific problem.

2. Offer the ideal product/service

Being specific with your product and the problem it solves is the key to being conversion-oriented in your offers. This is because your product will appear as the expert solution to a specific problem, which helps you to stand out from your competition and create a client base that trusts your expertise.

People gain the most momentum in growing a service when they make a targeted decision to solve a problem. When you focus your product’s marketing to a specific person, this audience will see it and they will love it. They will purchase the product and tell all of their friends, which is the best result for your business. Kenny Schumacher created two successful product agencies by focusing on the niches that he was the most skilled at. He used his own experiences to create targeted solutions for pain points like gaining followers on social media for businesses etc.

3. Evaluate your competition

You want to minimize the amount of direct competitors you’re putting your brand up against. Being too general in your marketing may end up with you being in direct competition with 50,000 brands rather than 5,000.

Try to evaluate your competition and any markets that are similar to your own. You want to see how you can differentiate from others in your space, making your brand stand out. Doing this will help you choose a niche that sells. Guest Hook is a content marketing agency that is able to help rental owners maximize their profits. They’re seen as the experts in short-term vacation rental content marketing, and because of this, they’re able to attract the right clients.

Different ways of niching down

There are many different ways that you can niche down. Here are 5 steps you can follow to find your niche today.

  • What gets you motivated? The first step to finding the right niche for your business is to evaluate what keeps you motivated. In order to build an effective marketing strategy, your niche needs to be something you connect with. Looking at your hobbies, passions, interests and motivations are excellent places to start.

  • What problem does your product solve? The next step is to take a deep dive into your target markets’ pain points. You want to identify the needs of your niche clients and ensure your problem directly solves the problem they face.

  • Check out your competition: Now’s the time to check out who is already doing well in your space. What separates you from them? How can you niche down in a way that makes you stand out and attract valuable niche clients?

  • Thinking about profit: The fourth step is to think about profitability of your niche. In order to be successful, your business needs to be profitable, and you need niche clients that are ready to pay for what you have to offer. Think about recurring services that encourage repeat niche clients and word-of-mouth growth.

  • Market research and validation: Make yourself known to communities you want to offer your services to, and be part of those that offer services in different niches. Are consumers looking for your services? Can you niche down and get clients that don’t compete with each other? Get them to know about you by writing niche content that is fun to read and exciting.

Ways to conduct research for your niche market

  • Start with yourself. What are your interests and problems you face? Amazon was founded because their CEO wanted an everything store, and Google was created to offer a better experience on the internet, based on solving Brin and Page own pain points. Start with your own experiences to create a winning product.

  • Ask your existing client base. With SPP, you can add questions as part of your client onboarding with the help of intake forms. This helps you to effectively streamline and conduct research with your existing client base without sinking any additional time into it.

  • Use internet surveys for market research: Social media, online forums and communities offer the perfect way to conduct cost effective market research for your product. Ask community members whether they’d be interested in the services you may want to potentially offer.

  • Go through online forums, groups and communities. Online communities like Reddit and Quora provide a trove of information on various niches you want to cater to. Authentically engage in these communities, do some sales safari, and see if your idea has legs.

  • Google Analytics: If you already have website traffic, Google analytics can provide insights into which pages your visitors engage with the most.

  • Keyword research. Keyword research tools like Ahrefs can help you identify underserved niches and high-volume queries that you can target to get clients. In fact, SEO is a marketing strategy used by many online businesses and agencies use it to scale growth to the next level. Understand what people search for and rank for queries searched by your target niche.

ahrefs keyword research

Using market research can help you to niche down effectively, vastly increasing your profitability. Your niche can help you to stand out from your competitors and truly connect with your target audience.


How to use niche positioning to your advantage

Niche positioning offers plenty of advantages. Using it can help you achieve the following:

  • Build brand authenticity: Niche positioning allows you to build loyalty with your target market, as you are able to target their pain points directly. Niche positioning showcases your brand’s authenticity and helps you to connect with your audience and their problems.

  • Position yourself as the expert: When you position yourself as the expert, your target audience is more inclined to buy from you. It’s easier to do this within a smaller, more specific niche group than something more specialized.

  • Higher ROI on marketing: Reduce your marketing expenditure and receive a higher ROI on your campaigns when you choose a more specialized niche, instead of spreading yourself too thin and not targeting the right people. When you specialize, you’re targeting your solution directly to your audience.

  • Be THE solution: SMG has positioned themselves as the experts for Shopify and WooCommerce solutions. They’ve found their niche and connected with it well by proposing themselves as a solution. When you present your product as THE solution to a problem, there’s more motivation for your target audience to act on your offer.

Also read

Niche positioning can be used to create a loyal audience for your product. It improves your ROI on marketing investment and encourages your target market to act on your offers. Without niche positioning, you risk putting yourself against too many competitors and failing to stand out.

Niche down FAQ

What does it mean to niche down?

To niche down is the process of finding your ideal customer and creating services or products that are perfect for them. It allows you to create a focused marketing strategy, and automate a large part of your business, therefore decreasing costs.

Is it important to niche down?

Certain companies and service providers can get an advantage by providing their solutions to a specific target market. It’s also easier to market yourself because your service or product is very clear, and so is your ideal customer group.

How do you niche down?

In short, you need to find your perfect customer, bundle services into a package that they would buy, and market it to them. Next, work on the service delivery and automate as much as you can to decrease costs.

Niching down fosters growth

Niching down allows you to grow faster, increase your profitability and will help you attract the right clients. You shouldn’t be afraid of niching down, as it will help you build a genuine connection with a loyal consumer base. You’re able to position your product as the solution for a specific problem, which helps improve the motivation for the consumer to act on your offer.

This article has discussed why you should niche down in-depth, including some of the benefits and how you can use niche positioning to your advantage. Using this guide, you will be able to learn exactly how to niche down, including five actionable steps you can take right now to find out which niche is right for you.

Avatar of Deian Isac
Head of Agency Success
Having worked as a content writer for 8+ years, Deian has partnered up with a lot of different agencies for content production. He understands their processes and now helps agencies scale up their operations with SPP. Besides his success activities, he also manages the content strategy of Service Provider Pro, writes captivating blog posts himself, and produces case studies.

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