The Specialist – Expand your sales with the Niche

“Find a niche and work it!”

“We are a niche player.”

“Our niche is small.” 

Work in distribution for any length of time and you will hear one of these phrases bandied about.  Generally, when distributions hear the word – niche – they think of a small company calling on a very narrow segment of business.  To illustrate the point, here is what many people would consider a “niche”:  A distributor who works exclusively in providing lighting products to gas stations.   Small, very narrowly focused and expert are all descriptions that come to mind.

I suggest Specialists change their definition of niche.  What if we developed “niche products?"  We change the definition from customer types to product groups to achieve this new mentality.  When a full line Electrical Distributor takes on a product which has very limited application appeal, we have a “niche product."  The new niche would consist of products not destined to be sold to everyone - products served up to a very select group of customers, say 10 or 20 highly targeted accounts.

Manufacturers report that distributors traditionally don’t do well with this type of product.  At the root of the problem lies the very nature of most distributor sales organizations.  Products are presented to a group of salespeople and a number of generalized applications are discussed.  If the product doesn’t have mass appeal, it gets lost in the shuffle.  Within a couple of weeks of the product launch, the product becomes long forgotten somewhere in a pile of catalogs.  When stock orders are involved, it sits collecting dust in that special odd ball section of the warehouse.

Because niche products offer an outstanding opportunity to expand your business during these trying economic times, now is exactly the right time to change your thinking. Three very compelling reasons make this true.

Niche products earn high gross margin dollars

By their very nature, niche products are high gross margin items.   Limited competition and lack of buying history put these into a class all their own.  It is not uncommon to find gross margins which are double the industry average. 

Niche products provide extra value to existing accounts

Problem solvers that solve a specific problem best describe the product niche.  During poor economic times, customers appreciate your efforts in locating a “better mousetrap."  Because they solve a problem, eliminate labor costs, or eliminate the need for outsourcing, all of these create intrinsic value that can be measured in dollars.

Niche products are often purchased from no-service or low-service competitors

This type of product is traditionally not sold by a tough competitor.  Instead engineering and maintenance departments find them via “Google search."  And, often the product must be purchased with a great deal of hassle-factor.  Because this may be the only product of its type purchased from their current supplier, prices are high and service is marginal at best.

The Question

With all of these compelling reasons to get involved in niche products, why have distributors traditionally faired so poorly in selling them?  While a number of factors weigh in the answer to this question, solid evidence points to lack of a product-oriented targeting process.  Specialists provide the best and most efficient means for establishing a meaningful target process at this level.

Product Targeting is achieved when products, potential application problems and customers are closely aligned.  While most supplier reps understand the ins and outs of their products, they often lack a detailed understanding of exactly where the product is applied to the customer’s needs.  Their territory size does not allow for detailed customer level knowledge.  To illustrate this point, let’s imagine a new product designed for underwater lighting.  The supplier rep typically understands the product specifications – the ability to withstand water pressure to 30 meters, the ability to create 5 lumens, etc.  But he typically lacks the ability to tie underwater lighting to its useful applications in artificial crystal farming or some other local application.  Further, he knows very few details about the customers in your territory.  Any discussion of the product comes as a footnote in some larger product/sales meeting.  Salespeople don’t make a connection and no sales are generated.

Getting Started

As a Specialist you hold the key to making things happen – you provide a competitive advantage over other organizations.  By tying product, application and customer closely together, you can identify and close in on these opportunities during tough times.  They work best when implemented one-on-one with your salespeople.  Join me on the high rocky cliffs La Quebrada cove as we prepare our Acapulco-style swan dive into the process.

Step One – Identify the Product

Identify potential niche product targets from your existing lines.  Ask yourself, what cool product exists somewhere in the footnotes of the master catalog that might fall through the cracks – nearly every line has them but they never find their way into the spotlight.

Step Two – Brainstorm Potential Applications

Ask yourself these questions.  Where might this product be used?  Are there applications that fall outside the realm of normalcy?  How is the problem solved today?  Have I seen something similar but not as elegant?

Step Three – Identify Customers with Probably Applications

Explore potential customer applications with your sales team.  These often happen informally on the shoulder of other events such as joint calls, training sessions and trade shows.  A word of caution; your goal falls not on gathering dozens of customers but rather a small handful who happen to have special needs.  If a customer application is uncertain – move on.  This exercise works on quality not quantity.  Some salespeople will have no targets in their territory.

Step Four – Arm the Salesperson with Clarifying Questions

After selecting the product target customer, provide your salesperson with questions that can be asked during the course of normal business.  Things like; how is the problem handled today?  Or, does the customer still run his process in a particular fashion?

Step Five – Present the Product

Bill the presentation as the culmination of research conducted to add value, and you will achieve two things: a warm reception and good will even if the sale does not happen.   I recommend the Specialist participate in the first of these presentations.  Doing so will allow further refinement of the presentation and will allow you to gather potential competitive market information.  This may be critical to maximizing Gross Margin dollars.

Step Six – Document the Value

In tough economic times, documenting value only accelerates in importance.  If you were able to eliminate manpower, energy usage, outsourcing or something else, turn it into a mini-case study.  During a recession, customers want supply partners who improve their cash flow and eliminate risk.  Your efforts do both.

Ancient Chinese Proverb

An ancient Chinese proverb reads, “The man who chases two rabbits catches neither.”  

During a recession, many distributor sales teams “flail around” chasing after every potential new customer they can identify.  It must be remembered; expanding your sales to existing customers is five times easier than selling to a completely new customer.  Plus, niche product targeting builds your value with the customer which makes it harder for another distributor to steal your business.