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Eloqeye | Could niching down be the key to scaling up your business?
What published research suggests
As a business owner, your main focus could be, to get as many customers through the door as possible, everyone to know about your products and or services. However, research published in the Harvard Business Review could suggest that tailoring your product or services to a select few might yield better results. The study shows just how effective personalized marketing can be. A few examples are:
29% increase in opened email rates when the subject lines were personalized.
41% increase in click-through rates when the emails contained tailored content about the user`s behaviour.
80% of consumers are more likely to purchase from a brand that offers personalized experiences.
Why is personalization is effective?
Cognitive ease and an emotional connection. People connect more with things that feel relevant and familiar to them. Niching down to a smaller demographic makes them feel seen or understood, deepening their connection with that brand. For example, addressing a room of people with different professions as `Hello doctors`, would be more engaging to the doctors in the room as opposed to saying `Hello world`. The latter is too general and doesn`t feel personal to anyone. Cognitive ease comes into play when we have that emotional connection with a brand and feel that their products or services are tailored to us, making the decision to buy a lot easier. We experience cognitive ease when information is presented in a way that requires minimal effort to absorb and understand.
Companies that increase sales through personalization
Amazon, Netflix, Spotify and many companies use their algorithms to personalize their products to their consumers. Giving them more of what they show interest in. 35% of Amazon`s sales come from personalized product recommendations based on their browsing patterns and purchase history. 80% of content watched on Netflix is driven by personalized recommendations of shows and movies based on their preferences. Spotify`s annual wrapped feature provides users with a unique, personalized music summary, connecting them to experiences they are familiar with.
Pros and cons of niching down
Not all companies have algorithm that offer tailored services to specific members in their customer base like Amazon, Netflix or Spotify. In that case, Niching down can be a risky move. Focusing on a specific group of people will discourage the remaining group that don`t meet your new requirement. Whether that`s a new price barrier, a specific occupation, a specific gender etc. It`s arguably much better to focus on a specific group, since you would be more effective at solving their problems on a more personal level. What you loose in numbers, you make up for in quality of service, leading to a more invested customer base.