Identify your niche market and follow this niche strategy to dominate your industry.
- A business niche is a specialized or focused area of a broader market that businesses can serve to differentiate themselves from the competition.
- Business owners should find a niche in their industry that has underserved or unmet needs.
- To find your niche, follow this strategy: Select your target audience, define an unmet or underserved need, research your customer base, create your business plan, and market your business to your specific audience.
Whether you open a business in a unique industry or a saturated market, it is important to differentiate yourself from the competition to win over your audience. To do this, entrepreneurs should find a specific business niche to target and modify their market strategy to accommodate that audience.
What is a business niche?
A business niche is a specialized or focused area of a broader market that your business serves specifically. According to Charlene Walters, business and branding mentor and author of Own Your Other, finding a niche differentiates your business from the competition and allows you to excel in your sector.
"[A business niche] is a hole in the current market where the business's USP (unique selling proposition) will be appreciated by a select group of customers, or target audience," Walters told Business News Daily. "This target audience might be one that is currently underserved and/or has a large market potential."
Finding a niche is important for small business owners who want to not only create a steady stream of revenue, but also establish a loyal audience. Walters said that a solid market niche helps to ensure that a particular group of customers will want to buy from your business, instead of going to the competition.
Matt Woodley is an online entrepreneur who founded MoverFocus.com, which caters to the international moving niche. He said that creating a business in a niche market sometimes gives entrepreneurs the ability to charge higher rates for their products or services. The supply and demand ratio, especially for those pioneering a new industry sector, can be extremely lucrative and gives you the chance to become the expert and thought leader in your field.
What is an example of a niche market?
There are several niche markets within every industry. If you think of a very specific product that serves one of your unique needs, it can probably be classified as a niche business idea. Walters mentioned the example of professional, wrinkle-free clothing: If a clothing company wanted to target executive women who travel frequently, it would make sense to have a line of wrinkle-free clothing to serve that specific need.
When asked about a profitable niche business, Woodley referred to Diapers.com and explained how it served a large niche market to become successful. "Many niche businesses that fill a hole in the market no one previously recognized quickly come to be considered essential. For instance, a diaper delivery service in New Jersey provided parents of infants with a convenient, affordable service that many came to rely on. Diapers.com eventually sold to Amazon for $545 million."
What is a niche strategy?
Now that you know what a niche market is, how do you create a business niche for your company? We spoke with Walters and Woodley to create a five-step niche strategy for entrepreneurs to follow.
- Select your target audience. To identify your niche, you can begin by selecting the general market. Woodley said a good approach is to focus on an area where you are knowledgeable, and then identify subtopics within that.
- Define an unmet or underserved need. Analyze your target audience and identify gaps in the marketplace. Walters said your products or services should soothe a pain point that your audience is currently experiencing. Choose a sector that also has anticipated growth.
- Research your customer base. Walters and Woodley both emphasized researching your target audience to understand their needs, goals, motivations, frustrations and expectations. Walters said that getting your audience involved as early as MVP (minimum viable product) development is essential; although this is something you should do at the start of your business, you should also perform regular maintenance checks to reassess your customer base and competition.
- Create your business plan. Woodley said to create a plan in which you define exactly what you'll provide and the need it will meet, describe your ideal customer, and decide on a pricing model. Fine-tune your business idea to reflect what you've learned about your target audience.
- Market your business to your specific audience. Just as your product or service is niche, your marketing efforts should be focused as well. Woodley said that targeted ads, blog posts and podcasts are invaluable tools for getting your message out to people likely to be interested in your niche business idea. For example, Woodley said a targeted marketing strategy for a small business selling vegan baked goods would be to appear on a podcast or local radio show dedicated to healthy eating.
These steps can help you successfully serve your target audience. "This hard work, good customer service, and the willingness to periodically reassess your business's market will put you well on the way to running a successful niche business," said Woodley.
How do you identify and dominate a business niche market?
Experts said there are a few key consumer elements that entrepreneurs should consider when trying to identify and dominate a niche market. Look for the following characteristics in your potential market audience.
1. Easily identifiable customers
Potential customers who are easy to see are a hallmark of a great business niche. Jerry Rackley, chief analyst at marketing research and advisory firm Demand Metric, said it should be easy to identify who would do business with you based on a set of reliable characteristics. "If you can't put your ideal customers into an identifiable segment, your business plan is a no-go."
2. Easily accessible customers
For a business niche to be profitable, your potential customers must also be accessible, and accessing them must be affordable, Rackley said. Otherwise, your great idea will be dead in the water.
"For example, I might develop an ideal solution for nomadic goatherders in Outer Mongolia, but I have no way of reaching them with information about my solution," Rackley said. "Lack of accessibility is also a business plan no-go."
3. An underserved or neglected market
Many markets become oversaturated with small businesses or startups eager to get in on the action. But for a business niche to really stand out, it should be underserved or even neglected, said Cody McLain, CEO and founder of WireFuseMedia and productivity podcast MindHack.
"In my experiences with hosting companies, there are often underserved or completely neglected markets, as well as markets that are being poorly served," said McLain, who suggests researching these markets in your industry as potential niches. "For example, in web hosting, you can use Google Analytics and AdWords to find searches that are not returning results to find markets or groups whose needs are not being met. Another way to find your niche is to search consumer ratings indexes and sites to find areas with poor customer service."
4. A large potential market
For your business to be profitable, your market and niche must be large enough that you can make money selling your products and services.
"In addition to identifying and accessing potential customers, there has to be enough of them," Rackley said. "The potential market for any business must have the size and mass to warrant the investment to enter that market."
Rackley gave the example of "a great solution for any human who has ever walked on the surface of the moon." While it might be easy to identify and even gain access to moonwalkers, currently there just aren't enough of them to qualify this as a great business niche. A small pool of potential customers means little or no growth potential, which is another critical characteristic of a profitable business niche.
Additional reporting by Sarita Harbour. Some source interviews were conducted for a previous version of this article.