The Benefits of a Niche Target Audience for Financial Brands

The following is adapted from James Robert Lay’s new book, Banking on Digital Growth.

Typically, when I ask a financial brand about the ideal audience they’d like to attract, they tell me they want to reach three audiences:

• Students, i.e., the 16- to 22-year-olds
• Prime lenders, i.e., 22- to 40-year-olds
• Depositors, i.e., 41- to 65-year-olds

Slight problem here: That’s basically everyone who’s 16 to 65 with money in their pocket and a heartbeat! I have to give these brands a wake-up call: You can’t be all things to all people.

If you try to do so, you become nothing to no one, especially with digital marketing.

Every financial brand I work with is interested in improving its digital marketing. Today, digital drives the majority of a financial brand’s business, and there are only three ways to increase digital growth: being a cost leader, achieving differentiation and focusing on a niche. 

As counterintuitive as it might seem, the best approach is to go small, not big. When you segment your audience down into smaller, more well-defined groups, each with specific needs, you can more confidently create value for them, making your marketing efforts more effective. 

But financial brand leadership teams still struggle with going down this path. To help you understand the need for niche, let’s look at why a niche target audience is the only practical option for digital growth and the myriad benefits of focusing on a niche.

Three Paths to Digital Growth

According to our research at the Digital Growth Institute, 87% of bank shopping journeys start online. This means that to succeed as a financial brand, you must focus on digital growth, and when it comes to digital growth, there are three paths you can take.

First, you can be a cost leader (i.e., the lowest-price option), but this isn’t practical for most financial brands because of the high investment it takes to achieve economies of scale. We see cost leadership in the marketplace today with brands like Amazon and Walmart. 

Second, you can take the path of differentiation and command a price premium, but this requires extensive research, customized product development and marketing to a broad segment of people to sustain growth over an extended period. We see differentiation with consumer brands, for example, like Apple and Louis Vuitton, and with high-end luxury auto brands like BMW and Mercedes.

Last but not least, you can focus on a niche, which is where I see the greatest opportunity for financial brands in today’s digital economy. Focus limits the competition as you gain the greatest understanding of all of the dynamics and unique consumer needs in a niche market. 

You likely can’t be the most trusted financial brand for everyone 16 to 65 with money in their pocket and a heartbeat, but perhaps you could be the most trusted and convenient financial brand for pet parents and partners, like vets. Or maybe you can become the most trusted financial brand for soccer moms in the communities you serve.

Looking at these three options, we see the only truly viable one for the vast majority of financial brands is to focus on creating value for a niche. Despite what you might think, narrowing your focus on a niche market segment doesn’t limit your future growth. Instead, it opens up entirely new worlds of opportunities that can only be found through intense focus.

The Benefits of the Niche 

When you niche down and focus on creating value for a select group of people, you create many benefits.

First and foremost, you create community, a concept that has been redefined thanks to digital, as communities are no longer organized strictly around physical boundaries or in-person meeting places. Communities now exist online and are accessible in the palm of our hand. So there’s opportunity here to rethink and reinvigorate community in the digital age.

Another benefit of focusing on the niche is you can finally produce content that creates value and helps guide specific groups of people within the community you serve to a bigger, better and brighter future.

Finally, by focusing on a niche, you limit ad waste and maximize your digital growth potential by getting the most value from limited resources, including money, time and talent. You focus your content distribution on the relevant channels most likely to touch the people in your niche.

All in all, a narrow niche can bring a lot of success and future growth. Just ask REI. Consumers can easily go to Amazon and buy camping gear, but instead, they go to REI. Why? It’s because of the expertise REI has about its products for the community it has built through the content it has produced. You can do the same with your financial brand.

Be Like a Crossbill

The crossbill—so named for its hooked bill, with crossed tips—is an interesting bird. With its unique, specialized bill, it can break into unopened conifer cones and extract the seeds. It’s not very good at eating much else, but it doesn’t need to be, because it’s better at eating conifer seeds than any other bird species.

It’s been proven through evolution in nature, and it’s true for financial brands as well: If you want to survive, specialization is one of the best strategies. You can’t be all things to all people, but you can be the most important thing to a niche audience.

If you want to stand out in today’s commoditized digital world—a world where every other financial brand promotes the same great rates, amazing service and look-alike laundry lists of product features—you need to specialize. You need to be a crossbill.

James Robert Lay is one of the world’s leading digital marketing authors, speakers, and advisors for financial brands. As the founder and CEO of the Digital Growth Institute, he has guided more than 520 financial brands on a mission to simplify digital marketing strategies that empower banks and credit unions to generate 10X more loans and deposits. His insights have been featured in outlets including US News and World Report, The Financial Brand, American Banker, CU Times, and CU Journal. Lay has also spoken at 200+ events and leads the CUES School of Strategic Marketing while lecturing at universities throughout the United States.