markets

Niche Marketing:
Where Quality Is
Better than Quantity

Please all, and you will please none.

— “The Man, The Boy, and The Donkey,” Aesop’s Fables

By Scott R. Kallenbach, FLMI

Associate Research Director,
Strategic Research, LIMRA

24 LIMRA’s MarketFacts Quarterly / Number 1, 2011

A esop’s Fables contains some of the most
well-known short stories. To this day,
the fables remain a popular choice for
illustrating a particular moral or teaching
a life lesson. Written in the 5th century
B.C., these fables have stood the test of time and serve
often as staples for educational curriculum and business
Smith Barney with Morgan Stanley, in a joint venture
majority-owned by Morgan Stanley. Clearly the super-
market approach was not the answer.
Perhaps the future now belongs to organizations and
sales professionals that concentrate on specific markets
and products. Companies may fare better with a narrow,
targeted approach than with a wider view. This article
training programs. — adapted from LIMRA’s 2011 Strategic Issues Series
Among the collection of 665 fables that Aesop wrote report Niche Marketing — explores niche or target mar-
is one entitled “The Man, The Boy, and The Donkey.” keting, and will help companies and sales professionals
In this fable, a father and son are walking to the village by providing insight into:
market — by their side is a donkey brought to transport
supplies back home. Along the way, the two are stopped • Why producers should consider specialization
by people passing by — each time resulting in a differ- • How to choose a niche
ent viewpoint of how best to use the donkey for travel. • Key success factors for companies
Instead of concentrating on fulfilling their intended • Getting producers interested in the niche
mission — arrive at the market, get supplies, and return marketing opportunity
home — the man and the boy get caught up in trying to
follow each suggestion. In doing so, they get off track, Why Specialize?
an accident occurs, and the donkey ultimately drowns. An expert is more effective than a generalist and
If only they had pursued one idea (rather than trying the only way to get expertise is to focus on a small
them all), the donkey would have lived and their mission number of things.
would have been a success. Instead, as a result of trying
— Independent agent, 20 years of experience
to please everyone, their mission failed.
Aesop’s moral of the story, “Please all and you will Being a specialist rather than a generalist clarifies
please none.” which solutions a sales professional provides, which can
What does Aesop have to do with niche marketing? help attract clients. Specialists can make a strong ben-
Perhaps, as marketers, we should adopt his moral as our efit statement in their marketing: “I help small-business
own: Instead of trying to be all things to all people, we owners achieve their financial and growth goals.” This
should focus on one or a few things and do them well. description is more powerful than a generalist’s “I do
Not long ago, conventional wisdom predicted that financial planning.”
the financial services industry would be dominated by By developing an expertise in a specific market, sales
a small number of national and global giants offering a professionals can provide tailored solutions that meet
“supermarket” approach to financial services. The epitome the unique needs of the niche they serve. Further, they
of this concept was Citigroup — the largest financial can develop their professional practice in areas that
services company in the world after the 1998 merger of align with their personal values and experience: ethnic
Citicorp and Travelers Group. The global financial ser- groups, families with special-needs children, nonprofit
vices giant had operations in banking, investments, and or family-owned businesses, or specific professions.
insurance. While Citigroup had a significant resource A niche strategy affords sales professionals the opportu-
advantage, were the unique expectations of consum- nity to provide valued service to people whose commit-
ers better served by smaller organizations? Within five ments they share and respect.
years of the merger, Citigroup began shedding businesses. Being a generalist requires a broad knowledge base
Though largely a result of the economic downturn, the that is often difficult to maintain. It may be easier to
organization recently spun-off Primerica and merged focus on a few specific markets or products and develop

MarketFacts Quarterly / Number 4,

LIMRA’s Marketfacts 1, 2010
2011 25
markets

Figure 1 Figure 2
Why Producers Choose to Current Types of Niches
Enter Niche Markets (Multiple responses)
(Multiple responses)
Small business 35%
Expand market to 49%
grow business Demographic 35%

Opportunity presented by new Product 29%

40%
product or sales concept
Professional 22%
Specific personal 27%
experience Specific income range 14%

Affinity 10%
Demographic changes
11%
in my territory Lifestyle 6%

Source: LIMRA (2011) Source: LIMRA (2011)

an expertise, rather than try to keep up with all that is Product-wise, insurance professionals tend to focus
available. In an era of heightened compliance and suit- on life insurance, health insurance (including Medicare
ability scrutiny, understanding the needs of a specific Supplement), retirement solutions, disability income
niche enhances the sales professional’s ability to recom- insurance, and long-term care insurance.
mend appropriate solutions. Health care professionals are the primary profession
Becoming a recognized expert in a particular field targeted. Favored segments include physicians, dentists,
can help sales professionals to obtain referrals. Their and nurses. There are some differences, however, among
reputation will precede them and customers will respect sales reps. Independent producers (who tend to be more
their specialized knowledge. Seventy percent of pro- experienced) drift to higher-end professionals (accoun-
ducers say they operate in a niche market. The decision tants, engineers, and lawyers), while affiliated agents
to become a specialist is most often made in order to (those who sell primarily or exclusively one company’s
expand a practice, or by seizing an opportunity pre- insurance products) are more drawn to the middle mar-
sented by a new product or sales concept (Figure 1). ket with a focus on the education sector.
About one quarter enter a niche market due to a spe-
cific personal experience, such as a career or life event, Choosing the Niche
while others become specialists in a given market due to Niche marketing requires specialization and a con-
their affiliation with a primary carrier. For example, the centrated effort to understand a particular market or
producer’s primary insurer could specialize in a niche product. Therefore it is essential that producers choose
market, such as a fraternal organization. a niche that aligns with their own goals and interests.
While no single niche dominates, the most popular Sales professionals should consider a two-pronged
types of niches among insurance producers are based approach when choosing a niche: They should identify
on small businesses (especially contractors and family their best clients and follow their passions and interests.
businesses) and demographics (Figure 2). The demo- The first step in identifying their best clients is to
graphic niche is further segmented into seniors, women, review the book of business. Producers should flag
and ethnicity (principally African Americans, Asians, favorite clients who also value the relationship — and
and Hispanics). who meet the sales rep’s target financial profile. Next,
they can determine what these clients have in common:

26 LIMRA’s MarketFacts Quarterly / Number 1, 2011

 Figure 3 Figure 4
How Producers Choose a Niche How Producers Choose a Company
(Single most important reason) (Single most important reason)
It is my primary 30%
Have personal connection 23% 45%
company
2%
My products are a good match 22%
Competitive 21%
Gravitated to it over time 17% 13%
products
37%
Chosen by my primary company 12%
Product features 13%
Underserved market that is growing 7% 7%
needed by group
23%
Opportunities in my territory 7%
Financial 9%
Underserved market I want to help 6% strength 8%
10%
Other 6% 9%
Company ethics and
values align with mine 10%
8%
Source: LIMRA (2011) All Affiliated Independent Source: LIMRA (2011)

• What do they do for a living? match for the group. Lack of experience also influences
• What are their interests? the choice of a niche. For 4 in 10 producers with two
• What needs do they have? years or less of experience, the niche was chosen because
of their primary insurance company. However, only
Why are some clients not “favorite” clients? Are they
about 1 in 8 of all producers identify this as a reason
high maintenance and low return? This is an opportu-
Once they have identified a niche, producers should
nity to determine if the relationship should continue.
take several steps to successfully engage it.
Now is the time to shed unprofitable clients in order
to focus on those who will help the practice thrive. 1. Study the niche What are the unique needs and chal-
Next, producers should consider their passions and lenges of its members? Sales professionals must give
interests. Do the people who share these interests fit the them exactly what they want, and how they want it.
profile of a favorite client? Sharing common interests 2. Organize the practice What is required in order to
with prospects helps create trust as the relationships are best serve the niche? For example, a sales profes-
established. The connections made through volunteer sional operating in the Hispanic market should have
activities, personal experience, hobbies, and interests a bilingual staff.
create a pool of prospective clients.
3. Separate from others Sales professionals must differ-
Professionals should exercise good judgment when
entiate themselves from other advisors already serv-
selecting a niche, and must answer some important ques-
ing the niche. What can the new entrants do better?
tions. Can the niche support the practice? Is this a grow-
Develop a unique solution, don’t copy one.
ing and sustainable segment? Is there a demand from the
niche for what the sales professional has to offer? How 4. Deliver the message Marketing messages should be
competitive is the landscape? If few others have tapped designed specifically for the niche. Sales professionals
into the niche to market financial services products, it need to “sound” like members of the niche and speak
could be a sign that the niche is not viable. their language. If sales professionals publish articles
Nearly half of producers choose their niche for per- in newsletters read by the niche, they should use the
sonal reasons (Figure 3). Either they have a personal appropriate vocabulary to establish themselves as
connection to it, or the products they offer are a good members of the niche. Further, consider delivering

MarketFacts Quarterly / Number 4,

LIMRA’s Marketfacts 1, 2010
2011 27
markets

Figure 5 Figure 6
Importance of Ongoing Training Preferred Training Method
When Choosing a Carrier 37%
Face-to-face
57% in classroom 40%
Very important 59% 34%
52% 17%
From a
carrier rep 14%
22%
Important 20%
22%
22% 17%
Via Webinars 17%
15% 18%
Neutral 14%
17% 9%
Self-study online 10%
2% 6%
Somewhat 2%
not important 4% 9%
Online in a
virtual classroom 9%
4% 8%
Not important at all 3% 8%
5% Self-study with
6%
published materials
11% All
All Affiliated Independent 3% Affiliated
One-on-one 4% Independent
with manager 3%
Source: LIMRA (2011) Source: LIMRA (2011)

the message not only to the niche, but also to those business around. In contrast, affiliated agents do
who may influence the niche — such as attorneys and not have the same choices, and these producers most
accountants. commonly choose a carrier based on it being their
primary company.
5. Know where the prospects are Sales professionals
should entertain the idea of becoming a member of
the same organizations and clubs as the niche. At- Key Success Factors for Companies
Operating in a Niche Market
tending industry meetings and providing content to
Both sales professionals and companies that operate in
programs is another way to strengthen the bond with
niche markets cite similar key success factors. While
the group. Participation in service or educational
specific needs and solutions vary by niche, producers
events can provide additional visibility. Local orga-
feel that the following five elements hold true — despite
nizations and faith communities may respond well
the differences among niches:
to offers of non-sales presentations on topics such
as employee benefits for small businesses, planned 1. Understanding the niche. Producers who are success-
bequeathing, making Medicare Supplement decisions, ful in a given niche have a deep understanding of
or defining retirement income needs. the group, and expect the same from their product
Independent reps are more likely to seek competitive partners.
products and features that are needed by the niche 2. Competitive prices. This is largely an attribute of
when selecting a partner (Figure 4). Since indepen- independent producers (Figure 4). However, affili-
dent producers are contracted with multiple compa- ated agents are also sensitive to price, reflecting the
nies, they are more sensitive to the competitiveness financial pressures of the niches they serve.
and features of products, and are more likely to shop

28 LIMRA’s MarketFacts Quarterly / Number 1, 2011

3. Consistent underwriting. Just as baseball pitchers that take into account the unique pension systems
want consistent calls from the home plate umpire, and benefits available to that group. Producers cite
producers want predictable underwriting results several specific success factors that are unique to a
from insurers. company’s given niche (Table 1).
4. Sales and marketing support. Beyond published
materials or brochures that highlight product Many producers are challenged to keep current on
features, producers value strategies to enter new products and regulations that affect their niche market.
markets or deepen existing relationships. They also When choosing a carrier, sales professionals place a
appreciate consumer educational materials that sup- high value on receiving ongoing training or information
port sales concepts. related to the niche (Figure 5). Insurance producers
prefer interactive training conducted face-to-face in a
5. Designing products for the specific niche. Producers classroom, rather than self-study programs or one-on-
are looking for innovative product solutions designed one meetings with their managers (Figure 6).
with the niche in mind. For example, companies that
support the education market need to offer products

Table 1
Niche Market Success Factors

Niche Key Success Factors for Company
Small Business • Identify market trends
• Provide bottom-line solutions with
high-touch service
Demographic Affluent • Responsiveness and attention to detail
Ethnic • Cultural sensitivity
Product Health insurance • Sales are price-sensitive, minimize renewal
increases, and keep coverage affordable
Long-term care • Solid underwriting from the beginning to
avoid future premium spikes
Professional Agriculture • Understand farming and have the
flexibility to keep up with changes in the
farming industry
Education • Products and support tailored to the niche
Engineers • Understand their mind-set; many like to be
in command
Physicians • Strong referral support. Physicians value
recommendations from colleagues

Source: LIMRA (2011)

MarketFacts Quarterly / Number 4,

LIMRA’s Marketfacts 1, 2010
2011 29
markets

Conclusion
Much has changed in the new millennium, and the Smaller, more nimble organizations can successfully
idea that “bigger is better” may not hold true. Today’s compete head-to-head with much larger organizations.
consumers increasingly want solutions that meet their The cost-efficiencies of larger organizations may be bal-
unique needs, and niche marketing could satisfy them. anced by the personal responsiveness and relationship
Specializing has its advantages; developing an expertise focus of smaller carriers.
can lead to deeper, more lucrative, and satisfying client Although he lived 2,500 years ago, Aesop sup-
relationships. But success doesn’t come easily. Carriers ported the concept of niche marketing in another fable:
and producers that operate in a niche market must have “The Vixen and the Lioness.” The moral of that story?
in-depth knowledge of the group and provide solutions Quality is better than quantity. 
that meet the group’s unique needs and challenges.
In niche marketing, size does not matter.

Scott R. Kallenbach, FLMI,

is Associate Research Director
of LIMRA’s Strategic Research
Program. Kallenbach is respon-
sible for identifying strategic
issues that can impact the
financial services industry
and helping member com -
panies develop strategies to meet these challenges
and promote growth. Previous to his current position,
Kallenbach was responsible for the delivery of member
benefits to LIMRA member companies that manufacture
and distribute financial products and services through
independent distribution systems, including banks,
broker-dealers, insurance companies, marketing organi-
zations, and wirehouses. Kallenbach received his bach-
elor’s degree from Bentley College. He can be reached
at 860-285-7829 (email, [email protected]).

30 LIMRA’s MarketFacts Quarterly / Number 1, 2011