Establish a loyal brand following through specialization

Specialization in business is when a company focuses on a precise area of the commercial market. Companies that specialize in a niche market area put their energy and resources into producing and/or promoting that particular product or service.

One mistake some businesses make is to try and spread out the variety of products and services offered by the company in hopes of attracting several different customer bases. While on the surface this may sound like a lucrative idea, the reality is this type of strategy tends to backfire.

While in some instances selling a variety of items can be a successful business model, in many ways a company can ultimately hurt themselves in terms of sales and establishing a loyal (and returning) customer base. Looking at it from this perspective, there is a lot to be said for the value of specialization.

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Selling specialized products or services in the market can often be a wise business decision. Here are three important reasons why businesses may want to consider figuring out what they are good at and then sharpen and perfect their chosen market items:

Niche areas

A niche is a specific consumer market who looks to buy a certain product or service. Companies that effectively can position themselves in a specific market will become better known in the industry. This can be attractive from a consumer perspective because generally consumers tend to seek out businesses who are authorities in the product or service needed. As a result, customers will often come to rely on businesses who have carefully cultivated and nurtured their craft in order to establish a solid expertise.

Establish the business as an expert source

Those businesses which specialize in an item or service often find consumers look to the company as experts in their field. No matter the product, service or industry, consumers most often prefer to turn to those they consider to be of proficient knowledge when making a purchase.

McDonald's is a perfect example of how broadening a market too far from the primary product can result in less success. Many decades ago Ray Croc founded the Golden Arches and created not only a thriving business, but a billion dollar empire. His business niche idea was so wildly successful it became the model for an entire industry that continues to grow.

Several years ago the fast food giant decide to expand their product and sell children's apparel; the line was called McKids. It essentially flopped. In approximately 2004 the company revived the idea, but it did not result in a major market being created for the brand. Consumers may look to McDonald's for food, but clothing is not the company's specialty; as a result consumers are more likely to turn to other trusted brands known for clothing.

Loss of innovation

When a company stretches itself too thin and looking into diversified areas of the market, they may lose sight of their primary market. With attention needing different areas, a loss of concentration, thus lowered innovation may occur. When it comes to selling products and services, diversification is not always beneficial for small businesses and sometimes even large businesses. While it may seem profitable to try and sell a variety of items or services, in the long run this could ultimately decrease profitability.

Specialization is a way to establish consumer confidence and grow a loyal customer base. I was reading this interesting article in Business Vancouver that describes how one company cut 172 products and put their efforts into one area. Described as a “bold move”, it was a success.

While in some instances, companies can branch out and offer similar, related products, but unless the business model is based on selling items as a variety store, entrepreneurs should carefully consider their market before branching out with new items or services.