How Should Digital Agencies Choose a Niche to Differentiate Themselves

There are 20,000 digital marketing agencies in the United States alone, as per a 2021 study by IBIS World, and millions are scattered worldwide. The market size of the agency business in the US is $19.8 billion, and it has an annual growth rate of 6.2%.

You have bleak chances of survival in case you are unable to differentiate your agency from others. Choosing a niche for your agency is a proven strategy to specialize in a particular segment, grow and scale your agency.

How Should Digital Agencies Choose a Niche?

The factors responsible for pushing the growth in the digital industry are a growing life cycle stage and consumer spending. It makes focusing on a niche market even more crucial when everyone else is offering generalized services.

If you are still caught in the specialist vs. generalist debate, here are some valuable insights from some of the most successful agencies on differentiating your agency by choosing a niche.

Mauricio Cardenal, the founder of Roofing Marketing Pros, a digital agency specializing in serving businesses that offer roofing services, has a unique business model. His agency provides qualified leads to roofing contractors with the help of a call center software and a digital marketing team.

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They generate leads using digital marketing tactics exclusively for a specific contractor and then nurture them with the help of a call center. When the lead is ripe, they send it to the roofing contractor to visit the site, provide them with the cost estimate, and close the deal.

So, a laser-focused approach provides you a five to ten times ROI. Unlike an agency that offers generalized services, specializing in a specific service involves using systems and processes that deliver results in very little time.

These processes help you aggressively bring a business in front of its audience and target them. In this case, the target audience is the people looking to get their roofs replaced or repaired.

Marketing Strategy to Target a Niche Market

Most roofing contractors wait for the stormy weather so that they can get new repair jobs. However, it can be highly frustrating for a business that depends on a single service to wait for their phone to ring for a new appointment in the neighborhood. Unfortunately, 90% of callers don't even qualify as serious customers. They call to check the prices, etc. So, such businesses need a sustainable business model to generate leads all around the year and not just during the stormy season.

Roofing Marketing Pros’ marketing strategy is also unique, just like his positioning. Instead of providing a rebuttal to the typical customer queries and objections such as “why should we hire you,” Mauricio Cardenal asks his prospect why he should partner with them.

He questions his customers, “are you genuinely committed to taking your business to the next level?” and “do you want to expand, change and hire more salespeople?“

Please have a look at a compelling and strong call to action on their landing page.

Tip: It's easy to target your audience as a specialist compared to a generalist because it reflects a high level of commitment and expertise.

1. Choose a Niche That You Are Familiar With

What prompted Cardenal to choose roofing contractors as a niche was his exposure to the business as a young intern that liberated him in adulthood. During his college days, he worked for a general contractor and learned the nuts and bolts of the construction business. He realized that PPC or Pay Per Click could be the best digital marketing strategy for a roofing company for short-term business goals, given the average ticket size for a roof. His experience and vision are paying off tremendously in terms of the success he has achieved for his clients.

2. Choose a Niche That Is in Demand

One more reason why Cardenal focused on roofing as a niche for his agency business was that it was an in-demand service.

With the commoditization of digital agency business and mushrooming digital marketing agencies across the globe (estimated to be more than one million), focusing on a specific niche is considered the best strategy for an agency. By doing so, agencies also push themselves to specialize in a particular niche.

So, they hire experts, improve their learning curve, conduct internal training and implement the best practices to improve quality and productivity. According to Mauricio Cardenal, high-quality work that offers value and standard processes in a niche-based agency allows you to charge higher prices, replicate the results and scale your agency. Specialization in a specific segment also enables you to build relationships with the top influencers in that segment.

But, it's crucial to make sure that this niche you choose is in demand and there is not much competition.

3. Find a Digitally Friendly Niche

If you choose a segment that avoids digital marketing, you'll be less likely to succeed as a digital marketing agency. For example, some local businesses that thrive on word of mouth or references may not be very digital-friendly.

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Some of the companies deliberately avoid digital marketing. You should avoid such niches.

4. Perform Competitive Analysis

To succeed in digital marketing, it's essential to know what your competitors are doing. This way, you can eliminate a lot of time wasted with trial and error. Research your biggest competitors and find out their killer marketing strategies and what they are offering. Conduct a SWOT analysis to know their strengths and weaknesses and discover the service gaps you can fill. However, it's important to note that you shouldn't tread a beaten track. Don't allow your competition to dictate what you should do. Craft your personal and brand identity to blaze a new trail and shout it out loud in your community.

5. Define Your Buyer Persona or Customer Avatar

Defining your ideal customer avatar and buyer persona refines your messaging. Try to know every little thing you can to understand their habits, routine, likes, dislikes, passion, and what drives them to take action. Give your avatar a name. The better you know your prospective customer, the easier it would be to connect with them.

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6. Assess the Financial Prowess of Your Audience

A company might not be financially sound to buy your premium services even if it's booming. It happens when we have low-profit margins. So, apart from the willingness and interest to buy, they must also have a good cash flow to afford your services. If they hire an agency, a business needs to spend 10-15% of its revenues on marketing initiatives. But, very few companies can afford that. So, don't waste your time on unqualified leads.

7. Evaluate the Niche Opportunity

It would help if you didn't choose a niche like a cryptocurrency, which is still in its nascent stages, or something like payday loans or credit cards which is almost saturated. When something is either too popular or nearly saturated, it will cost a fortune to achieve any results. You don't stand a chance even if there is the slightest opportunity as the giant agencies are already after them. Additionally, you may also avoid an almost obscure niche where your services are not at all required. So, choose a niche where you have ample opportunities to grow and make money.

8. Choose a Niche That Has Long-Term Growth Potential

Several niches are facing existential crises during the pandemic. Garments, textiles, and the warp knitting industry are the worst hit, and millions of people have lost their employment in these niches worldwide. Apart from the temporary turmoil, some industries are on the verge of collapse, and that's often irreversible. So, it would help if you always chose a niche that has long-term growth prospects.

9. Decide to Have a Passion and Deep-Seated Love for Your Niche

You should choose a niche that you love unconditionally and genuinely care for. If you have a real emotional connection with that industry, products, and people, it will help you a lot, especially during tough times. If you're doing it just because that specific niche is booming, chances are you might lose steam soon and don't find yourself giving your 100%.

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10. Hire a Mentor

In the end, it's crucial to have a mentor who can do some hand-holding when the going gets tough, and you find yourself fighting your battle alone. The best mentor is someone who has the experience of running a successful agency himself. Running an agency isn't for the faint-hearted. It can be the scariest and loneliest experience for an entrepreneur, but if you persevere, it will transform your personal and professional life.

Conclusion

As you visualize opportunities in a specific niche, so will others. So, even though you have a small number of competitors, the competition can be fierce. If you're a bit inexperienced in your field, choosing a niche can be counterproductive. If you don't have the expertise in a particular domain, hire a trained workforce to meet clients' expectations. So, the second most crucial thing after choosing a niche is working hard and acquiring specialization in that niche. If you select a business segment and can still not deliver results, your reputation will be at stake.