A few years ago I was holidaying with my wife and daughter in Bali. We stayed in four different hotels during our stay. Each hotel had plenty of positive reviews which is why I chose them. After staying at each hotel I discovered each had good and bad points as you would expect.
The first hotel
The first hotel’s room was spacious with a great view of their exceptionally large pool. Staff were super friendly, always smiling and saying hello. This was obviously a part of their training. The main negative for this hotel was the location. It was inconvenient and required waiting in the lobby for a taxi every time we wanted to go somewhere. That wouldn’t have been such a problem except the lobby was often crowded with lots of people smoking.
The second hotel
The second hotel was conveniently located in the centre of town. The staff again were friendly and the rooms were nice but small. The first negative was the hotel did not supply a bed for our 7 year old daughter. As a result we were all squeezed into one queen size bed. Our daughter likes to spread out so it took a bit of adjusting. Another big problem though was the noise. The hotel was designed in a fairly tight rectangle with all the rooms facing the pool in the middle. This meant that when people were in the pool area the noise could be heard clearly from the rooms even with doors and windows closed. This was fine in the day but not at 6am while we were still sleeping. It turned out that some parents were letting their kids into the pool early probably to get them out of the room despite a 7am start time.
What was my problem?
The first two hotels had friendly staff and the rooms were nice. The average traveler would have been happy with both these hotels as was evident from the reviews yet, both had plenty of empty rooms and were discounting rooms to attract customers. It wasn’t high season and I would have said that was a contributing factor except I know there were a few hotels that were fully booked charging similar or even higher prices. So what’s the problem? Well nothing if you are in the business of owning an average hotel. Average hotels do okay but are rarely booked out. With the above mentioned hotels I was not disappointed but equally not impressed. I did write reviews but gave both hotels a 3 out of 5.
Hotel 3, a cut above the rest
Hotel number 3 was a very different experience. It was a boutique style hotel with an emphasis on relaxation. Nothing about the place felt rushed. It was exactly what we were looking for. The design, colours and general layout were excellent. You could see that they had considered every detail. Great hotels like great nightclubs focus on catering to a niche audience. When I say great, I mean those hotels that are always booked out, often months in advance and rarely if ever offer discounts. These hotels are not trying to please everyone and just like the nightclubs this is achieved by implementing standards or rules. For example, the hotel might have a rule where you are not allowed to smoke anywhere within the hotel including your rooms and outdoor areas. This means the hotel might miss out on smokers as potential guests but, it will automatically attract the non-smokers who want a smoke-free hotel. These non-smokers will in turn tell their friends. Another option might be to implement an internal rule where they have family rooms on one side and non-family rooms on the other to cater for different types of guests. As much as we love kids the idea of a quiet zone for adults is appealing to some.
Catering to a niche
If you start by catering to a niche, especially one that is underserved you stand a better chance of being competitive. Many failed businesses try to cast too wide of a net. Being too wide often puts you in competition to the major players who have the advantage of size. In Bali it seems smokers rule. Being a non-smoking family we found this challenging. Every restaurant seem to have at least one smoker well positioned to ensure we received their second hand smoke. In the second week we discovered a hotel with a restaurant that was non-smoking and we couldn’t believe our luck. The food and service were average and even a little over priced but we loved it.
Niche businesses are more likely to go viral
We don’t talk about the unremarkable business. Niche businesses are generally worth talking about because they are different. There is no guarantee here of course. Being different doesn’t necessarily make you remarkable but to be remarkable you do need to be different in some way. If you have a niche business and are not remarkable there are generally reasons why. You should begin by looking at whether there is truly a market for your business idea. If you believe there is then the next step is to look at whether you are reaching those people through your marketing. When launching a niche business its critical that you understand how to reach your niche audience. Its not uncommon for a good niche business to fail simply because they failed to reach their target audience.
The niche cost savings
When you have a lot of aggressive competitors there is an urgency to keep up to remain competitive. Competition will often drive up your expenses and drive down your profits not to mention stealing market share. If the competing hotel down the road starts offering free breakfast at the same price per room as your hotel, you’ll likely need to do the same to stay in the game. The niche hotel on the other hand is less affected by those competing on price or freebies. The non-smoking hotel should still be busy with or without the free breakfast provided they have the basics in place.
Every business has niche potential
It's easy to believe that other similar businesses to your’s are direct competitors. There are actually very few direct competitors today. Take Coke and Pepsi for example. On the surface they may seem like direct competitors fighting for a bigger share of the cola market but the truth is not quite so black and white. Your typical cola drinker is quite loyal. Coke drinkers rarely if ever drink Pepsi and vice versa. Both Coke and Pepsi have created their own niches. So much so that people rarely say Coca Cola or Pepsi Cola. Now there is certainly a battleground between these two brands for new cola drinkers and a certain percentage of swing drinkers but, neither is in danger of losing the majority of their market share. If anything, their biggest threat would be from a non-cola drink. Water and energy drinks have probably posed the biggest threat in recent years to Coke and Pepsi.
Don’t forget the basics
There is more to the story then simply deciding to be a niche business. Today’s consumers have very high standards. If you are the only game in town offering something that people desperately need you essentially have a monopoly. As with any monopoly you can get away with poor service and high prices. The reality is there are very few monopolies today. Being the only restaurant or hotel in town might allow you the luxury of a monopoly but even then you have to be careful. People might just choose to stay at home or drive to the next town. Assuming you don’t have a monopoly I recommend you get the basics right. By basics I mean good service, fair pricing and delivering on your promise. Being a niche business will attract attention but failing on the basics will kill any return business and positive word of mouth. Your advantage is the fact that you are catering to a niche but that advantage can be quickly lost if you fail on the basics. In fact, being exceptionally good on the basics can earn you a reputation outside of your niche which should be your ultimate goal. Starbucks’s niche began with serious coffee drinkers but their attention to the basics soon spread to the wider community.
Apply to the business of guitar teaching
Most guitar teachers try to appeal to everyone and anyone who wants to learn guitar. Beginners, advanced, children, adults, rock players, jazz players, classical players etc. When every teacher is basically doing the same thing students choosing a teacher will tend to base their decision on price, convenience and perhaps gut feeling. When you pick a niche you become the teacher of choice for those seeking your niche. For example if you made yourself the expert in teaching kids electric guitar you are more likely to stand out. Sure other teachers will advertise that they teach kids rock guitar but you are ’the specialist’. As a parent I would be more inclined to booked my child in with you. You are also likely to gain a wider reputation. Students will travel from further afield if they know you are the specialist. When I created G4 Guitar I decided to specialise in teaching beginners using a set method. Most guitar teachers actually prefer not to use a method. They want to have the ability to be flexible and design the method as they go. Students on the other hand often want a method to follow. For the beginner student a method is comfortable. This gave me a unique position in the market and the result was my school exploded into 5 schools with 20 teachers employed and more than 3,000 students enrolled over a 2 and 1/2 years. I had tapped into a market that was being underserved.