Whether you call it target marketing, market segmentation or niche development, the results are clear: The most successful and profitable agencies are increasingly focusing on adding specialization to their general business offerings, according to 20 years of experience recorded in the Big “I” Best Practices research.
Why? Niche marketing drives measurable increases in net revenue, profit and agency value. For example, for agencies with revenue between $2.5 million and $5 million, here are three key results attributable to developing specialized or niche markets:
- Valuation multiple increase: 57%
- Net revenue from industry specialty: 23.9%
- Net revenue from product specialty: 9.1%
And where did that increase in agency value multiple arise?
- Increase in profitability: 55%
- Increase in growth: 45%
For those same agencies, choosing a niche based upon an industry as opposed to a specific product nearly tripled the net revenue. While that difference was less dramatic in other revenue categories, the results were consistent—revenue attributable to industry specialization exceeded product specialty across the board.
Showing your agency’s potential gains from niche marketing is just one example of a wealth of valuable information revealed by a deeper dive into the Best Practices Study. So while benchmarking your existing numbers against the best agencies is a no-brainer, don’t overlook the veritable treasure trove of data available to power your short- and long-term agency planning. The 2013 Best Practices Study results are available for in both hard-copy and e-book formats. For more information, visit Best Practices online or email Best Practices staff.