Many agencies develop a specialized focus on one particular industry to position themselves as go-to marketing partners within a specific niche. While this makes sense for some agencies, others can find themselves limited by too intense a focus on one industry, unable to easily generate business outside of that narrow space.
What are the dangers of an agency focusing too much on one industry, and why? This is the question we posed to members of Forbes Agency Council. Below, you can read their expert insights to help you decide whether or not your agency should niche down.
Members explore potential dangers of agencies specializing in one industry.
Photos courtesy of the individual members.
1. No Room To Shift To Other Verticals
Having survived the recession of 2008 after almost losing my business, I realized that working in three or four verticals simultaneously is best. Not only does it give you room to shift as one vertical increases or decreases, but it also gives you the opportunity to specialize in the services you provide. – Niki Jones, Niki Jones Agency, Inc.
2. More Vulnerability To Corporate Changes
Drastic corporate changes, such as mergers, sales and consolidations, can crush your business. This happened in the beer industry when Anheuser-Busch was sold to InBev. Marketing for the new AB InBev was moved out of St. Louis to New York City, leaving many beer-specialized agencies in St. Louis out of luck, and in some cases, having to close. – Brian Handrigan, Advocado
3. Pricing Pressure From Third Parties
A serious risk often overlooked when specializing is pricing pressure from third parties. Your prices can be higher if you are known and trusted. However, on the flip side, new competitors or market forces can too easily impact the success of your pricing model. The agency industry, in general, is experiencing this right now with the availability of cheaper gig solutions. – Christine Wetzler, Pietryla PR
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4. The Risk Of Industry Collapse
In focusing on one industry, there’s a risk that it will collapse, as the tourism and restaurant industries did during the Covid-19 pandemic. That said, you have to focus as an agency on one area to start, then systematically move to adjoining areas. If you have deep domain expertise, that will differentiate you and make your services premium. – Bryan Scanlon, Look Left Marketing
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5. Limited Growth Potential
The main danger is that you limit your agency’s growth potential. Do you want to be turning down business that comes your way because it is not within your niche industry? Probably not. You also open yourself up to the risk of that industry changing or declining. Imagine being an agency that only works with cruise liners and then Covid-19 comes along and puts the industry out of business. – Jonas Muthoni, Deviate Agency
6. Difficulty Repositioning In Downturns
As we’ve witnessed recently, if your vertical or niche takes a unilateral downturn, you most likely will struggle to reposition yourself into another vertical or niche. The agency bankruptcy rates for those specializing in travel, entertainment and other industries have been sky-high this year. – JP Holecka, POWERSHiFTER Digital
7. An Undiversified Income Stream
The danger an agency faces in relying too heavily on one niche is the same that any business faces in overinvesting in one customer segment: an undiversified income stream. If that industry or niche faces a downturn, your agency could be overexposed and face layoffs or, worse, go out of business. Hedge that risk by targeting clients in diverse industries. – Mary Ann O’Brien, OBI Creative
8. Not Staying Disciplined In That Focus
The only danger of an agency focusing on a niche industry is not staying disciplined in that focus. Becoming an expert in a specific industry requires maintaining 100% focus on that expertise to drive the overall knowledge of your team and specialization of the agency. It means saying “no” to business if it does not fit your target industry, even if it is a potential high-revenue client. – Lindsey Groepper, BLASTmedia
9. Niche Expertise Creates Blinders
There’s a tendency to believe niche expertise means success. It doesn’t. It creates blinders. The fact is, different industries and areas of consumer practice inform each other. The same people who buy detergent also go to the movies and eat out at restaurants. Learn what you can from them in every area of their lives and use it to better every campaign, no matter the industry. – Craig Greiwe, Rogers & Cowan
10. No Safety Net When Traffic Decreases
One thing that is very important to keep in mind is that, if you are going to go with one niche, you run the risk of not being able to access other ways to make money when there is a large fallback in that niche. What that ultimately means is that there is no safety net for you when you have a huge decrease in the traffic coming through. – Jon James, Ignited Results
11. Fewer Opportunities And More Monotony
The biggest disadvantage of establishing a specialized focus in one particular industry is that it narrows down new business opportunities. Sometimes working for only that particular industry also makes it monotonous. – Mandeep Singh, SEO Discovery Pvt Ltd.
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Author: Expert Panel®, Forbes Councils Member
