Growing Your Niche Business

Finely targeting your marketing efforts is an effective way to start digging out of last year’s financial woes. This article offers tips to help you on your way.

Changes in the economy, technology, and markets are putting extreme pressure on companies that conduct their marketing in a business-as-usual way. The scramble to find new business, new markets, and new customers in an environment hostile to all three efforts means nothing is business as usual anymore.

It’s no secret that all segments of the graphic-arts industry are now fiercely competitive. We’ve moved away from simply converting substrate with ink and an image. We can no longer be focused on products or processes if we want to bring real value to the market. We need to solve bigger problems for our clients. To do this, we need to open our tool bags and get down to business within our own targeted markets.

Are you one of those printers who’s still in denial over the impact of digital, or maybe you’re whining about losing business to low-cost competitors. The time to wake up to the situation is long gone. Sooner or later every serious screen printer faced with these issues will begin to search for a niche mar-ket where they can differentiate themselves and increase their profit potential.

In December 2006, I wrote an article called “Finding, Developing, and Prospering from Niche Markets.” In light of the current conditions, I’d like to expand on that article in an effort to stimulate our own recovery efforts. The markets are showing some signs of life, but there’s so much more we can all do in a positive way.
 

Finding your niche
The process of finding niche markets is really quite deliberate and direct. There’s no real mystery to it. It requires some research, asking the right questions, and knowing where to go to get the information you need. You usually start close to home—take your own personal special interests. These are things you enjoy doing, often hobby or recreational in nature. A number of very important aspects become crystal clear when you think in these terms. The process is outlined clearly in the previous article. In this next step, I’d like to introduce concrete ways you can expand and develop maximum results from your specialized areas. The three core ways to grow any business are:

1. Increase the size of your customer base by adding more customers.
2. Increase the average sale amount.
3. Increase purchases frequency.

Each of these areas is independent of the other, but they act on each other. So, a 15% increase in each area would result in 1.15 x 1.15 x 1.15, or a 152% increase in overall top-line revenue. It’s often possible to increase one area by very large amounts—50%, 100%, or more. Compounded with controlled efforts in the other two areas, you can double or even triple your business in a given period of time. The concepts are simple but the process isn’t necessarily easy. So let’s focus on where you can get the fastest results.

The concepts I’m about to share are not new, but they are different and not well known. They involve creativity and changing the way we think. That’s precisely why I like them so much—the average competitor has no idea what you’re doing or how you’re doing it.

Increasing your customer base
Adding customers on your own is the most expensive and difficult of the three areas. I usually don’t concentrate on this approach unless I have some easy and cheap way to get in front of many highly targeted prospects. To do this, I almost always rely on a very simple, yet highly effective, method. It is the joint venture or collaboration approach. Here is how it works.

As an example, I want to sell more printed shirts with hunting and fishing designs. My normal channel is through small, local gun shops and sporting-goods stores. I would go to those local customers and ask them who their wholesale suppliers are. I would ask which one had the best sales rep or sales force. Every industry has intermediate wholesalers and distributors. I would ask them the names of their local reps and find out whether they can put me in touch with them.

Once I have that information, I call the rep and explain that I have a way to increase his or her business. Then I ask about the marketing or sales manager for the distributor and follow up by making an appointment for a presentation. During this presentation, I outline how to use the hunting and fishing images in cooperation with a promotion aimed at all of the regional hunting and fishing shops to which they sell. They need to have at least 500 customers for this to work. Most of the distributors I work with have between 2000-5000 wholesale accounts for the markets in which I work.

Let’s say the wholesaler wants to push a specific fly-fishing reel as part of the promotion. My shop would create a killer graphic featuring that reel and make the shirts available at a very attractive price. The manufacturer of the reels will often have a co-op advertising budget to further offset the cost of the shirts. I’ve seen situations where the cost of the shirts to the end user (hunting and fishing shop) is $2.00 or less per garment with great graphics. We then offer individual personalization for $1.00 per shirt with a minimum of 36-72 pieces. In this case the local dealers get a great, personalized shirt that’s targeted to his customers for $3.00 each. The dealers buy like crazy because they can either sell the shirts at cheap price points or for more substantial markups. Either way, your business gets a flood of new customers who can buy all of your designs for next to nothing.
 

In this example, everyone wins. You tag onto an existing mailing list or sales force. You get new, targeted customers. You get someone else to share in the cost of the promotion. The wholesalers move reels, and the local hunting and fishing shops get a great deal they can convert into additional revenue. It’s really exciting to watch how enthusiastically everyone involved embraces this business model. If you use this approach in multiple niches, it’s easily possible to double the number of customers in a very, very short period of time. I’ve seen it happen in 90 days or less.

Increasing average order size
Boosting average order size is another easy way to increase sales. Within any niche market are two additional opportunities to increase sales: adding complementary sales and adding collateral sales.

Complementary sales are products that are used together with the original items. In apparel the natural extensions are sweatshirts with T-shirts or hats with T-shirts or both. In this case, I would create bundle offers. Bundles are easy to create—after all, the cost is in the setup and the actual time it takes to print more goods is next to nothing once we’re up and running.

Here’s an example of an approach to take. Say the price per unit for a printed T-shirt at 36 pieces is $6.00 and your cost for the garment (including freight in) is $2.75. Your margin is $3.25. Now the cost of a hooded sweatshirt is $12.00 and you would normally sell it printed for $22.00. You could create a hoodie/tee bundle for $24.00. Your total cost would be $14.75 and your margin would be $9.25. You’re printing twice as many units, but your margin is greater.

You can also mix and match. You can upsell the offer, meaning that this bundle is available only with orders of 72 T-shirts. At 72 pieces you can have as many as 36 T-shirt/hoodie bundles. So you sell 36 shirts at normal margin and 36 bundles at the bundle margin. If the customer normally orders 36 pieces, your sales would be $216 with $117 in margin. With the bundle your sales would be $216 + $864 = $1080. You margin would be $450. This is a conservative model. You’ve increased sales 500% and increased margin 384% while increasing the amount of time to print the order by just a few minutes (if you have an automatic press.)

Bundling is a beautiful thing. It makes picking your pricing apart really difficult, and it really irritates your competitors because they think you’re low-balling and that you couldn’t be making a profit with those prices. You really aren’t. You’re increasing your utilization in an intelligent way. It comes down to understanding what your costs are and allocating them based on how long it takes you to do the work. We know we’re generating margin when the presses are printing. When they aren’t, such as during changeovers, we’re subtracting from what we just generated. We all want larger runs. This is the fastest and easiest way to get them. The incremental-margin approach to sales is very powerful if you plan carefully.

Collateral products represent additional sales of items not directly related to the original purchase. This tactic, also called a cross-sell, is most often employed with a partner or as a joint venture. A perfect example of this is the program used to promote the fishing reels. Your partner offers a special on the reels and you offer a bundled special on shirts. With the manufacturer co-op advertising dollars, the end user gets a great deal and you end up with new customers and increased sales. You take the sale a step further by using an upsell to the bundle program described above.

Event promotion offers many collateral opportunities. Think about banners, signs, and P-O-P at the event itself. How about promotional flyers in advance of the event? Consider bumper stickers for all of the participants, supporters, and sponsors. How about an entire promotional bundle? You get the idea. The possibilities are endless.

One of the main drivers I have is my relationship with all of the local graphic-design studios and marketing and PR firms. These groups in your area need to know what you do and how you do it. By putting together packages that address all of the collateral materials in one place and offering a 15% (or higher) commission to the referring firms, you can create a steady stream of new business and establish yourself as the knowledgeable expert in that niche.

Increasing order frequency
Frequency refers to how many times per year a client buys from you. If your current record-keeping program does not allow you to create special reports, you’ll have to do the work by hand in a program like Microsoft Excel. You should be interested in several things. The first is how many times per year each customer buys. For most T-shirt companies the average is one order per customer every six to nine months. When you drill down you’ll find seasonal patterns in retail, tourism, and schools. You might sell two football orders to the high school booster club during football season and one for the annual fundraiser auction—and then nothing for nine months. So here you have three orders in three months and then nothing for the rest of the year.

But this only addresses one sport. What about all of the other sports? Do the others have their own booster clubs? And then you have the bands, theater groups, and clubs. Using the bundling method, you would approach the school and give them one very attractive price for all groups and events over the whole school year. Collectively your margin goes down, but in total your revenue goes up massively.

You can do the same with businesses. You can offer a service where you create fresh, new, seasonal graphics. They would change every three months and be designed to tie in with seasonal sales and merchandising. So instead of a purchase every six months for the employees, you increase by double or even triple as the graphics serve as mobile devices for P-O-P advertising. This method works very well for home and garden centers, where the seasonal changes give many opportunities for great designs.

Tying it all together
Marketing to niches means understanding what’s important to the people in your target market and taking advantage of emotional triggers. For example, hunters and fishermen look forward to opening day of their seasons. The same is true for school athletics or events like theater productions. The real key to your success in niche markets is knowing what’s important to them. You want an emotional connection, and you want to play on that emotional connection.
 

The second key element is having enough of a critical base in the niche that you can develop some economies of scale. Think preprint. Use the wholesale joint-venture approach to build a diversified group of customers. Create really great graphics that tie to that market. Become known as the go-to source. Create anticipation for the next great graphic.

You want and need a profile in those niches. As you grow, you can become a sponsor of events in those areas. The T-shirt and banner guys know this well. Every event involves T-shirts and banners, and printers are always hit up for donations, discounts, and so forth. Leverage this. Don’t be satisfied with your logo on the back of the shirts or at the bottom of the banners. Go beyond. Reach out to each and every one of the other sponsors with a special program just for them. This is another great way to easily grow your customer base.

Time is another consideration. Think about what customers need before, during, and after—or in the past, present, and future. Each client has unique needs and requirements, all of which present sales opportunities. An example is pre-event promotion, followed by sales at the event, and capped off by commemorative/reunion products.

Don’t be afraid to reach out to other companies. They’re looking for sales too. When you make these kinds of deals, you make lots of new friends who are excited to tell others about what you do. If you enter joint ventures with wholesale companies, you can create a steady stream of new business that you almost don’t need to touch.
 

We often get bogged down in our own way of looking at things—especially during the last year. Many companies were just busy being busy, meaning they were always working but not making that much profit. Everything collapsed for them when business slowed down, and panic set in when they had time on their hands for the first time in years. They were left to figure out how to replace lost customers and lost business. Hopefully, these examples will inspire you to take a fresh look and move on in a positive way. This is only the beginning.
 

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