Niche Marketing: The Difference Between Hitting and Missing Your Target Market
by Randy White
It was the mid-1990s and almost every chain of hotels & motels was hurting. Profit was down and top executives were nervous. That is, except for those who managed the Courtyard by Marriott chain. It didn't make sense. The hotels in the Courtyard chain didn't have fancy restaurants or lounges or gift shops. Heck, they didn't even have lobbies. But there they were, pulling in travelers. Their secret? Niche marketing.
You see, the folks at Marriott designed the Courtyard chain specifically to cater to the niche market of cost-conscious white-collar businesspeople. Its design was based on extensive research into what these people actually wanted, as opposed to what hotels traditionally provided. As a result, the Courtyard developed a loyal repeat following and positive word-of-mouth among its target market that fueled the chain's impressive occupancy rates and profitability.
Niche marketing is everywhere, from hotels to restaurants to retail. Holiday Inn Express and the Ritz Carlton; Denny's and Applebee; Dress Barn and The Limited - they appeal to dramatically different consumers. Common sense, right? The mistake most people make is to assume that the key element is price, with one example designed to appeal to the more affluent consumer. That assumption is just true enough to be dangerous, and it has kept the community-based leisure center industry from realizing the profits that come through true niche marketing.
Often, leisure center owners rely on market demographics when designing an FEC. It's understandable; demographics seem straightforward enough. However, demographics (income, age, ethnicity, marital status, education, etc.) miss the point. The key differentiating characteristic among niche markets is socio-economics and lifestyles. Socio-economics basically means class based upon a person's social and economic standing, while lifestyle deals with a person's values and how they live and behave as consumers.
Socio-economics and lifestyles are different than demographics. Demographics describe purely quantitative features of a population, and the problem with them is that the best they can provide is a picture of the population in aggregate and in averages and medians. Demographics will not tell you the difference between two married males with $50,000 incomes. If one is a college professor and the other a factory foreman, their tastes, likes, values and lifestyle are likely to be quite different. Not only do demographics fail to cross-match demographic variables (so you can determine how many college-educated $50,000-income families with young children exist) but they also cannot tell you what those people are like - their values, behaviors, and lifestyles.
For that, you must turn to socio-economics and lifestyles. In the US, there are a number of systems that break the population into distinctive socio-economic/lifestyle [SEL] groups. One of the most respected systems, PRIZM by Claritas, has identified 62 distinctive SEL groups.
Unlike demographics, SEL analysis allows you to understand who the customer really is and have a good idea how they behave as a consumer. Let's go back to the example of two men, each married and each earning $50,000 a year. If one is a college professor and the other a factory foreman, their political affiliations are probably different, as are their magazine and television preferences and the way they dress. So if you were designing a restaurant for the professor, it would be a lot different than one designed for the factory foreman.
This same principle of SEL targeting is crucial for the design of leisure centers such as a family entertainment center. You can't be something special to everyone because the tastes, values and preferences of one SEL group are completely different than another. SELs that attend a country club would not feel comfortable in a blue-collar neighborhood bar and vice versa. Campers are not the same SELs as those who vacation at Club Med. Birds of a feather really do flock together; we choose to be around people like ourselves, and the evidence is as close as your neighborhood.
To create the high level of guest satisfaction necessary to create loyal guests and repeat business, you must delight them. If you don't delight them, they'll stay home or go somewhere else. The way to delight guests is to find out what they want and then give it to them. Not the people in the neighborhood ten miles away. Them.
To define a niche market for a leisure center you need at least four different pieces of information.
- Age. Is the center targeting families with younger children, adolescents and teens, or adults?
- Affinity group. Are you targeting families, couples, singles or teams?
- Type of social experience. Does the market prefer passive entertainment, thrills and rides, sports, social interaction, self-enrichment, competition, etc.?
- SELs. If the design is not targeted for a specific SEL group, then the result is that the less-desirable SELs, the lower socio-economic groups, are often attracted and drive away the higher socio-economic groups.
SEL differences are not necessarily due to different geographic locations. If you look at the population within any geographic area, such as the typical market area for a community-based leisure center, there will be variations that cannot be determined using demographics.
Our company performs feasibility studies for many new facilities, and it also analyzes the market area populations of existing businesses. The following is a real example from a suburban area where the center's market area reached from 4 miles to 9 miles from the center. (True market areas are not circles, but rather are amoebae-shaped.) The project was a family entertainment center targeting children between 2 and 9 years accompanied by their parents. Its market area contained 40,100 children ages 9 and younger. The market area also contained 13 different SEL groups of families with younger children; six groups made up 86 percent of the children. The SELs varied from lower middle income, mostly high-school graduate, blue-collar and service workers to wealthy college-graduate professionals. The six largest SELs were:
Name of SEL Description % of Children Blue Blood Estates Elite, super-rich families 10 Winner's Circles Executive suburban families 7 Money & Brains Sophisticated townhouse families 16 Young Literati Urban couples 11 American Dreams Established urban immigrants 32 Urban Achievers Mid-level white-collar urbanites 10
Common sense would tell you to target the American Dreams SEL, right? Wrong.
While the adults in the families had attended college, they did not have as high a graduation and advanced-degree rate as the four other SELs before them. Also, the American Dreams SEL was upper-middle-income, while three of the other SELs were affluent, elite or wealthy. Targeting American Dreams might have excluded three of the higher SEL groups. And, targeting the elite and wealthy SELs might have intimidated the more than 50 percent of the market that was below those SELs by two or more income levels. So what did we do? We targeted Money & Brains, a college-educated affluent SEL.
Have you ever noticed that model homes are furnished and decorated one notch higher than the people who can afford them? That's because most people like to feel a little better than their station in life. By targeting Money & Brains, the center would appeal to the groups that were one income grouping below - Young Literati and American Dreams. But the facility would strongly match the values and tastes of all but the most-affluent SEL, Blue Blood Estates, and the next-highest Urban Achievers. The result was a niche target that strongly matched 66 percent of the market area's families with young children.
We then designed every aspect of the center to target Money & Brains. The mix, storyline, theme, level of finish, ambience, food service and operations were all custom- designed to create the highest value for the targeted SEL. The result was a successful FEC with sales exceeding $120 per square foot. While many industry people would assume that sales that high are impossible to sustain over the long haul, we would tell them to never underestimate the power of a niche.
Even without direct competition, an entertainment center can fail if they don't target a niche market. Assuming that all potential guests are generic results in a center that is special to no one, which is exactly who shows up after awhile. So by the second, or at most, early in the third year, the business becomes just another industry roadkill.
Now I am going to compare the location-based leisure industry to gasoline sales. Trust me, there is a point. Within any market area, the gallons of gasoline that drivers will purchase is fixed. In general, people drive about the same amount each year, so all gas stations are competing for a slice of a pie that doesn't vary in size. But with location-based leisure, that's not the case. The more the center matches the values, tastes and needs of its market, the more frequently the market will visit. The demand is elastic, growing bigger or smaller based on the leisure center's ability to satisfy guests. It's something like movie theaters, where a blockbuster like *Titanic* will dramatically increase attendance, and a string of bombs will clear the theaters.
To make the most of this elastic market, a leisure center must make some very specific accommodates to pull in its target SELs.
Storyline and Theme
The storyline drives the entire design process for a leisure center. In a sense, the storyline is the facility's mythology. As the first stage of design, it guides the conceptualization of the project and becomes the filter for all subsequent design decisions. From the storyline the theme and the thematic interpretation in the form of characters, the physical, visual and sensual environment, and the facility's operations. Good storyline-based themes make guests feel the place is real. They give it a sense of place and uniqueness, and create an emotional bond with guests. The theme creates the project's brand identity.
The way to do this is to reflect in the storyline the values of the target SEL grouping. The Money & Brains SEL in Philadelphia will have similar lifestyles and values as the Money & Brains SEL in Phoenix, but differences in local culture, heritage and customs - what makes the niche market proud about their community - also must be woven into the theme to make it unique and special.
Every community has unique cultural qualities. To develop a relevant storyline, the values of the target niche market need to be identified. This is done by conducting qualitative research in the targeted SELs, usually in the form of focus groups, to further understand how their geographic location influences their values, tastes and needs. Our company calls this cultural- and values-based theming. It makes the center relevant to the targeted SELs by making the storyline and theme a reflection of their values, lifestyles and culture. Creating this unique personality (brand) and sense of place will create an emotional bond to the target market. And remember, most purchase decision are more emotional than they are rational.
Mix of Attractions and Events
Some indoor FECs that used rides as their anchor have failed in high socio-economic areas. Why? Rides appeal more to lower socio-economic groups than to college- educated families. Ride centers can easily be perceived as a "poor man's amusement park." College-educated SELs tend to prefer attractions and events that contain an educational or self-enrichment element, like museums, aquariums, edutainment centers and cultural festivals.
Okay, so this is on the obvious side, but you need to match the price with the SEL niche market. Some SELs are very price-conscious (coupons and discounts appeal to them) and will make purchase decisions based strongly on price. Other SELs are looking more for value, and will gladly pay a premium for a produce that they perceive to have high value. They'll even be suspicious if the price is too low! To succeed with this group, the center must take a completely different approach, as different as Nordstrom's is from Kmart.
Design and Finish
One way that an SEL determines what the price should be is by a facility's design and finish. A Kmart finish wouldn't work in Nordstrom's and vice versa - traditional customers from both groups would run for the doors. The design and finish, and even the colors used, should match the preferences of the targeted SEL.
One great thing about design and finish is that it can be used to bridge gaps between an SEL and an attraction. For example, a go-kart track that appeals to upscale, college- educated families should have a different design and type of karts and a more sophisticated level of finish and theming than a track targeting blue-collar teenagers and young adults.
Level of Service
To succeed in today's demanding marketplace, good service is required for *any* business, and that includes leisure centers. What makes for good service, however, varies among SEL groups. Someone from a higher socio-economic group, for example, would be entirely comfortable with the attentive service at the Ritz Carlton, while someone who prefers the Hampton Inn would probably feel uncomfortable. Targeting the design of the center's service to a specific SEL group makes the service feel very personal to them.
Food and Beverage
It is no surprise, then, that the same person that prefers the Ritz will prefer a different menu than the Hampton Inn person. Whether the center should offer coffee or cappuccino, health foods or fries, gourmet food or regular chow all depends on which SEL groups are targeted.
Being special to a smaller group of guests by having your center precisely match that group's tastes and values is a proven formula for success. Birds of a feather know what they like. Make sure you design a nest that attracts the flock you want.