How To Choose Your Niche - Generalist v Specialist

Today I look at the topic of how to choose your niche and in particular, whether you should be a generalist or specialist.

Just about the biggest decisions you can make in your business are to define your niche by deciding "who your target customers are", "what you are going to sell" and "why someone should buy from you".

The natural inclination is to go BIG - and target as many possible customers with as many different products as possible.

The standard advice from the marketing and strategy gurus is to go SMALL - to find as tight a niche as possible which you can dominate and call your own.

I have wrestled with this dilemma

If you struggle with this decision, believe me, you are not alone.

I have to hold my hand up and admit that I resist the forces to specialise.

I know all the theories but I don't want to be a narrow specialist.

What Do The Gurus Do?

I currently focus on the work of nine gurus so let's just walk through and see how good they are at taking the standard advice. I should however say that this analysis is biased by my own interpretations of where their strengths lie.

1. Jay Abraham - Jay's coverage is wide crossing large and small businesses, he actively promotes the fact that he has worked with clients in over 400 different industries and the scope of his marketing and profitable opportunity-seeking advice is wide.
    
2. Michael Gerber - The mission of Michael's work with the E Myth books and his business coaching firm E Myth Worldwide is "to transform small businesses worldwide, one small business at a time." No narrow niche there although he has written several more targeted E Myth books.
    
3. Jay Conrad Levinson - Guerrilla Marketing's principle focus is on helping small businesses replace money focused marketing with marketing that comes from time, effort and imagination but these techniques are being adapted by big businesses as well. Some of his co-written books are focused on particular professions eg "Guerrilla Marketing for Consultants"
    
4. Chet Holmes - Chet built his reputation consulting with many of the Fortune 500 companies but with the joint ventures with Jay Abraham and Jay Conrad Levinson, has now extended the scope of his marketing to small businesses.
    
5. Peter Thomson - Peter has consulted with some of the biggest companies in the UK but also targets small businesses, both directly and through his joint venture with the accountancy network PROBIZ.
    
6. Brian Tracy - Brian's scope is incredibly wide crossing all areas of management, personal development and the last time I looked at the extended Success Secrets audio series, it even included relationship advice.
    
7. Scott Hallman - Scott provides marketing coaching and business coaching for all types of small business.
    
8. Rich Schefren - Rich focused on business coaching for Internet marketing entrepreneurs when he started but his latest moves in a joint venture with Jay Abraham are to create mavens of "go to experts" in any market.
    
9. Michael Port - Michael concentrates on marketing/business coaching for professional service providers but with joint ventures with Mitch Meyerson on the Product Factory (creating information products) and Traffic School (better websites) has extended his scope to other types of small business.

On that evidence, it does seem as if there is a "do as I say and not do as I do" approach, even with my favourite business gurus.

The Opportunity For Profit Forces You To Widen Your Scope

A quick refresher on Jay Abraham's three ways to grow a business model.

1. More customers - creating the temptation to widen the type of customers you target
    
2. A higher value transaction - the desire to cross-sell related items at the time of the initial purchase encourages you to add extra products and services to your range
    
3. Increasing the frequency of purchases - again encourages adding extra products

This is great advice for increasing your profit from a position of strength but can be fatal for a new business operating from a position of weakness.

Are You Customer Focused, Product Focused or Capability Focused?

I ask my prospective coaching clients where they focus their business - on customers, on products or on capabilities.

What do I mean?

Some businesses are very tuned into their customers and clients and are able to use the strength of the relationship and market understanding to cross-sell other products and services.

This has always been my strength. Because I am multi-skilled with wide experience, projects with larger clients are often extended with wider or different scopes.

Some businesses are experts in a particular product and you can see this with in the retail industry with the category killers like Toys'R'Us.

Some businesses are experts in a particular special capability and can apply that skills to different kinds of clients or products.

For example an accountant can use the same skills with a farmer, a funeral director and an umbrella manufacturer (not sure what the psychiatrists would make of those that combination) while a steel fabricator may make components for the automobile industry and finished consumer goods.

It may seem strange but you can even switch successfully.

I have used a capability focused marketing campaign (emphasising my strengths and experience in one particular area) to open doors and then switched to my more natural customer focus when I have established a great relationship.

In fact, my experience has been that clients are keener in extending the project time and scope than I am and I have allowed my commitment to the client to take me into areas where I haven't wanted to go.

Value Disciplines

My customer, capability or product focus mirrors the three value disciplines identified by Michael Treacy and Fred Wiersema:

1. Operational excellence - providing customers with reliable products at competitive prices, delivered easily and conveniently - this is my capability focus.
    
2. Customer intimacy - segmenting markets and providing tailored offerings which exactly match the demands, wants and needs of the particular customer group - this is my customer focus.
    
3. Product leadership - developing innovative products that lead the field - this is my product focus.

You gain advantage by leading in one category while meeting general industry standards in the others.

My preference, and why I am starting the custompreneur revolution is customer focus.

It may seem the obvious direction to go in. Isn't all marketing supposed to be about finding out the needs and wants of the market and then designing, communicating and delivering the best solutions?

Not everyone agrees.

For example, some top strategists say you should focus on enhancing your core competencies and capabilities because they underpin everything you do.

Generalist v Specialist

I have identified four potential positions that you can occupy, which under certain situations can bring you success.

1. The specialist's specialist
    
2. The specialist
    
3. The generalist as a gateway
    
4. The generalist as a trusted jack of all trades

The Specialist's Specialist

You have spent many years studying and gaining experience in a very narrow field and you are seen as the specialist's specialist. The person experts in a wider field of the same discipline refer people to when it requires intensive skill, knowledge and experience.

Perhaps it is the heart surgeon who is the only person in the world to have successfully done a particular type of operation.

Perhaps it is a tax specialist who has deals with avoidance schemes and disputes in a particular narrow area of tax law.

The appeal is that people are naturally attracted to experts and particularly if they are "the only" or "the best". Prices are high because people are prepared to pay for quality and what is perceived as the best "most likely outcome."

It is the safe purchase.

Why skimp on a heart surgeon if it is a complicated procedure and the choice is between someone who has done the operation 50 times with an 85% success record, someone who is half the price with a 50% success record and someone else a quarter of the price who has never done it before?

The dangers of the specialist's specialist to the customer/client

If you are the client and you wrongly diagnose your problem and go directly to a specialist's specialist, they may see the problem they are looking for when it is not the priority problem.

More often, they will say that your diagnosis is wrong but won't be able to point you towards other alternative problems and solutions. Their focus is like a laser which shines brightly on their speciality but there is darkness around it.

The dangers of being the specialist's specialist

You have three main risks:

1. The specialist market is not big enough. There is a gamble here. If you are the only one, then effectively the market does not exist before you create it.
    
2. Suddenly you are no longer "the fastest gunslinger in the west." Thanks to the Internet, it is easier and easier for customers and clients to find out about alternatives from other parts of the country or even the world.
    
3. Your skills become obsolete, either because they are declining (think sports stars) or new innovations and technology bring new ideas and solutions into the marketplace.

Because your skills are so specialised, they are not easily transferable to other areas unless you are leading from the front and you will not have a general reputation to leverage.

The Specialist

In this position you are seen as a specialist in your particular area, perhaps to use the example above, you are a heart surgeon and you perform a variety of operations or you are a corporation tax specialist and advise companies how to save tax.

Again people are attracted to experts but the competition is tougher and it is more difficult to differentiate between people with the same speciality.

Buying from a specialist

How do you decide between one employment lawyer and another? You don't know enough to test them on their skills so you have to fall back on recommendation, reputation, convenience or price.

On the plus side, their wider knowledge means that you are more likely to have more common ground between your skills and theirs although it may still be very limited. They are able to see the bigger picture and are more likely to see the true causes and effects although there will still be a bias for seeing problems in their area without seeing more urgent priorities elsewhere.

Selling as a specialist

If you are a specialist, then you are able to design your service to meet the needs of a precise group of people much more effectively than generalists. You can spend more time, attention and money on the factors that really matter to this particular market niche and reduce or ignore issues that matter little to your niche but are important to the general market.

The Generalist as a Gatekeeper

This person has much wider knowledge than a specialist and is able to make an accurate diagnosis of the issues and an accurate assessment of whether the problem is within their skills or requires specialist intervention.

Because their knowledge is more detailed than yours, they are able to make a much better informed assessment of the relative attributes of the individual specialists and when those specialist skills are required.

This is the position that a general practitioner doctor holds. When you are ill, you see a general practitioner and based on your symptoms, the GP decides whether you can be treated, whether you need to see a specialist consultant or whether you need to have tests to confirm a speculative diagnosis.

It is also the position I hold.

I am proud of my general business skills but I am also very aware of where those skills need to be supplemented.

I can use my skills to put together overall business development programs but I am also able to identify the better quality and value programs from other providers.

I can help you to apply Guerrilla Marketing techniques to your business. After all I am a Certified Guerrilla Marketing Coach but I would prefer you learnt them directly from Jay Conrad Levinson. It avoids my own preferences and biases (where for example I prefer Jay Abraham's approach to a particular marketing problem) because I can explain my thoughts and you can respond from a position of knowledge.

The Generalist - Jack Of All Trades

This is the most dangerous position as here you represent yourself as the solution to all kinds of different problems and you are vulnerable to being out-specialised, either directly or indirectly by the other three positions.

For example you may be an estate agent looking for a business coach and you meet three of us:

1. The business coach, jack of all trades - "I can help you and any other business."
    
2. Me - "I could help you but I know a better, lower cost option. Just take a look at Michael Port and his Book Yourself Solid coaching program delivered over the Internet in group coaching sessions."
    
3. The estate agent business coach - "I only work with estate agents on a one-to-one basis. I am more expensive but I offer great results for businesses just like yours and I have all these case studies and testimonials to prove it."

It looks like options 2 or 3 doesn't it, depending on your attitudes to cost and exclusivity.

It is an aside to the main article but I do have some reservations about industry specialists who bring one particular prescription to the table.

I have seen too many firms adopt the same techniques, the same direct mail letters, the same website template. It is great if you are the only business in your geographical area taking advantage of the ideas and you have an exclusive territory but not so good when the same ideas are used by your closest competitors. You are back to being an undifferentiated commodity but you have paid dearly for the privilege.

Back to the generalist/specialist debate, the generalist has the opportunity to build an extremely deep relationship with happy clients and to follow the three ways to grow a business model. Cross-sells to different products and services are a natural part of the way the generalist works and may be the major reason why the customer selected the generalist.

How Do You Choose - Generalist or Specialist?

There are a number of factors that you need to take into account:

1. What do you want? A specialist may earn more while the specialism lasts, a generalist may have a more interesting time although you shouldn't underestimate the attraction and satisfaction in really knowing one subject really well.
    
2. Where do your strengths lie? Rich Schefren's Strengths Mastery Advantage is a great way to find out your natural working strengths. It is essential that you work with your strengths rather than against them.
    
3. Is there a specialist niche that is big enough to support your desired income? There is no point specialising if the market is not large enough and no one wants those particular skills.
    
4. Can you defend that specialist niche against imitators? Are your skills and experience really unique which prevents people from copying if they see your success or can you build an overwhelming reputation that inhibits them from even trying?
      
5. Can you reach enough prospective customers with credibility? Even if the market is potentially big enough, customers have to know that you exist with a solution so you need to be able to reach out to them through or marketing or they need to be searching for a solution in a way that means they can find you.

A Compelling Reason To Buy

For anyone to buy, they must have confidence so there must be a compelling reason to buy.

For the specialist's specialist, that may be because you are the best and money doesn't matter.

For the generalist jack of all trades, it may be a matter of convenience and trust from an existing relationship based on other work done to the required standard or better. Some people distrust arrangements that are clearly one-off.

It is one of the problems with trades like roofing. Done right and you won't need another roof for 30 years so in these cases the normal incentive of future work for a great job is eliminated. It creates space for convincing, smooth talking opportunists. I know because I had an honest roofer as a client and it is very difficult when competitors will low-ball your offer to win the job and then effectively hold the customer to ransom when the old roof is removed.

Some Markets Naturally Create Specialists Or Generalists

Location is a critical factor.

Rural communities with low populations don't justify specialist resources. Local solicitors are generalists. Local accountants are generalists. Local shops are convenience stores selling a wide variety of different goods.

Cities and urban conurbations provide the population to allow specialists to find a large enough market, either as standalone businesses or separate departments in bigger firms. A city like Birmingham in the UK will support specialist tax departments in all the main accountancy firms together with some specialist tax only firms who receive work from Generalists as Gatekeepers.

But cities also allow generalists to thrive as there are enough people who want one trusted source for a variety of needs, either as a matter of convenience or preference. It is not just in services either as you can see it in retail with the growth of the superstores like Tesco in the UK and Walmart in the US who offer convenience, low prices and reliable quality.

You should note however that High Street based department stores are often out-specialised because they fail to provide a compelling reason to buy with a combination of high prices, limited selection and little specialised knowledge.

The Internet rewards specialists who concentrate on serving a tightly defined niche based on search engine optimisation around tightly defined keywords. This is particularly the case for information based products which can be supplied across the world.

At the same time, the Internet also rewards established big companies like Amazon to trade on their established relationships and widen the scope of their products from books, to CDs and DVDs, to electrical goods...

Specialist or Generalist - The Choice Is Yours

Unlike many of the gurus, I can't see that the case for specialisation is overwhelming.

I admire people who make the deliberate decision to specialise. It is a brave mood which can reap rich rewards.

But, perhaps just because I view it through my own rose tinted spectacles, I admire people who deliberately choose the generalist route. They do risk being out focused by the specialists.

Why buy marketing advice from a business coach when you can buy from a marketing consultant? Why buy advertising advice from a marketing consultant if you can buy from an advertising coach? Why buy from an advertising coach if you are interested in billboards and you know the billboard expert.

The important thing is to make the decision and then make sure that everything you do is consistent with that decision.

You can't be a specialist and a generalist.

I know that most of us only use a tiny proportion of our brain power but I recommend that you think of it like a filled container with no lid. Every time you pour in more knowledge, something else splashes out.

Remember the essential thing is that you give your customers a compelling reason to buy from you and that is usually based on a customer focus, product focus or capability focus.

The other essential element to remember is that you need to reach out to your market regularly and consistently.

The danger is that generalists see nearly everyone as their potential customers and fail to concentrate their marketing, perhaps direct mailing 250 prospects this month and another 250 prospects the following month... They never build up any identity with their prospective customers or momentum along the purchase decision chain.

So to keep your marketing focused on a relatively small number of prospective customers, you have to make decisions. Are you going to target a tight geographical area? Are you only going to look at particular types or sizes of business? Even as a generalist you still have to find your target market and particular positioning message which customers will find compelling.

The danger for a specialist is that they can't identify their target market. Sometimes the specialism will be based on customer demographics so the customers can be easily identified eg the estate agents for the estate agent business coach mentioned above.

Other times the specialist may have to rely on prospects searching for answers and solutions and therefore has to promote their services through general media broadcasts of PR and advertising.

Reputation and familiarity are the reasons why the gurus are able to cross markets so easily. Do you think you'd care that after success stories in over 400 different industries, Jay Abraham admitted that yours was a new one?

Wanted. Clients looking for:

A Chartered Accountant/MBA/Certified Guerrilla Marketing Coach addicted to Jay Abraham's profit building strategies with a keen interest in Internet marketing within 100 miles of Birmingham.

How much more specialised do you want me to be?

I think I am the only one, unless you know differently...

This is the fundamental point Each of us are unique but we have to put that uniqueness across to potential customers in a way that makes sense to them so they think "Aha, this is the person I have been looking for."

I Would Like Your Thoughts On Choosing A Niche

What do you think about this generalist v specialist choice of market niche?

Have you tried one approach and moved to the other position?

Perhaps you started as a generalist and found that you needed to tighten your niche to attract customers. Or perhaps you worked a tight niche and your customers encouraged you to branch out into other areas.

Comments

[Francisco (Houston Wedding DJ) Perez]

Wow this is extensive and well written. I have to agree with your comment about some gurus and how they "expand" their niche. It's hard to find, day in and day out, topics to cover on a small niche.

[Paul Simister]

Hi Francisco.
Thanks for the comment.

I have been wanting to write about this issue for some time because I know that it bothers many people.

It is much longer than I originally expected because I was carried away yesterday afternoon and the words and ideas just flowed.

I am delighted that at least someone likes it.

Paul

[Raymond Chua]

I love Jay's teaching and some of his techniques has greatly help me to improve my business. :)

[Evan]

Thanks Paul,

It's quite an article and on a big topic.

The problem is the word 'niche' I think. (At a deeper level that practitioners aren't necessarily good teachers - of which more anon).

A niche is a box or label that exists in somebodys (hopefully lots of bodies) mind. A new niche can be invented by how something is presented eg sports drink instead of soft drink and so on. Al and Laura Reis talk about this (in fact it is just about all that they do think about).

So a niche focus can cut across categories and be very large. Providing everything cheap is a niche. And may well be attractive to some people (is this Walmart's niche?). So generalist is a niche too.

Much confusion is because people think that niches are the same as markets - that they are 'out there' somewhere. They're not. Once this is seen much confusion can be cleared away.

I think the basic reason is that a marketing practitioner knows what a niche is. But they aren't necessarily good at conveying this. Teaching is a separate skill. The best at something aren't always the best teachers.

This is such an extraordinary post. So packed with information. Many thanks for it.

[Paul Simister]

Raymond, thanks for your post. I am not sure whether you like Jay Abraham or Jay Conrad Levinson but you will find plenty more of their influence on this blog.

You may also like to take a look at:
http://www.squidoo.com/jayabrahammarketing
http://www.squidoo.com/guerrillamarketing1

Evan, a great comment. Thanks.

I find that niche is used in two ways
a) meaning market segment
b) meaning positioning in customers' minds.

Some people have been exposed to both meanings and understand the difference, some have been exposed to both and are now even more confused, some people have met one definition but not the other while the remainder are familiar with the word but not the meaning.

I tried not to focus too much on the word niche for this reason because my main focus was on the generalist v specialist debate.

Even niche as positioning in people's minds can vary in context between product, what the brand stands for and its fit into the economy to luxury continuum or the brand values.

Foe example, think "Coca Cola" and I think of a "brown, fizzy, sweet liquid".

Think "Rolls Royce" and I think of a "luxury car" but think "Rolls Royce solution" and I think "the most expensive option and even perhaps over-engineered/specified for my pocket."

Think "Disney" and I can go off at tangents to cartoons, theme parks, films or "good wholesome entertainment".

It is beginning to look like there could be another long article on the way about this topic.

In this original article I wanted to show that the generalist and specialist had particularly strengths, opportunities and risks and to help people choose.

I do believe that there is pressure to over-specialise. In fact, do you remember the Theodore Levitt HBR articles about "marketing myopia" and how the railroad companies should have defined themselves in the transport industry.

I have a strategy article coming up on this soon.