Whether you open a business in a unique industry or a saturated market, it’s critical to differentiate yourself from the competition to win over your audience. To do this, entrepreneurs should find a specific business niche where they can target and modify their market strategy to accommodate that audience. We’ll explain how to find your business niche and build an effective niche strategy.
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 said. “This target audience might be one that is currently underserved and/or has a large market potential.”
Why is finding a business niche important?
If you have ever heard the expression “jack of all trades, master of none,” you can see the importance of determining your specialization and differentiating yourself from the competition.
Finding a niche is crucial for small business owners who want to create a steady revenue stream, establish a loyal audience and create a more focused business.
The benefits of identifying a business niche include the following:
- A niche helps you establish a loyal customer base. A solid market niche helps ensure that specific customers will want to buy from your business instead of the competition. A niche allows them to identify your product and brand, and know that your offer suits their needs. Additionally, focusing on a smaller target audience lets you concentrate on the quality of your customer service and establish a long-lasting relationship.
- It minimizes competition. By entering a niche, you automatically differentiate yourself from companies seeking the mass market. You don’t have to compete with big names and can instead focus on delivering an exceptional product and service.
- It reduces marketing costs. If you know your precise customer group, you can cut down on small business marketing, advertising and promotional costs. You’ll run targeted ads and campaigns specific to your audience’s needs instead of spending your resources on broader promotional efforts. Niche marketing also allows you to create a better rapport with your audience and build more personal relationships.
- It demonstrates expertise. By occupying a business niche, you can establish yourself as an expert and thought leader in the field rather than providing yet another generic service or product. Being an expert helps you stand out from the competition, attract relevant customers and establish trust.
- Catering to a niche can increase profit. Matt Woodley, an online entrepreneur who founded MoverFocus.com, which caters to the international moving niche, says that creating a business in a niche market can lead to higher rates for products or services. The supply and demand ratio, especially for those pioneering a new industry sector, can be highly lucrative.
Since your customer can’t be everyone, figure out your ideal customer by creating a buyer persona. Look to your best clients and most profitable customers to inspire a list of your target’s specific wants and needs.
What are some niche market examples?
Every industry has several niche markets. If you think of a specific product that serves one of your unique needs, you can probably classify it as a niche business idea.
Walters mentioned the example of professional, wrinkle-free clothing: If a clothing company wanted to target executives who travel frequently, it would make sense to have a line of wrinkle-free clothing to serve that specific need.
Some examples of industries with profitable niche market possibilities include fitness and weight loss, pet care, and child and baby care.
Fitness and weight loss niche markets
In 2021, the U.S. weight loss market alone was estimated at $72.6 billion. With ever-increasing health awareness and consciousness, the demand for fitness products and services is likely to continue growing.
Here are some examples of niche businesses in the fitness and weight loss space:
- Strava is a social network that connects athletes in the same surroundings.
- Lose It is an app-based personalized weight loss program.
- Hydrow is an “outdoor reality” rowing machine that delivers on-river experiences at home.
While the market might seem crowded with established giants like WW (Weight Watchers), there are always possibilities for establishing an even more niche business within this space.
Pet care niche markets
The ever-growing pet market has boundless potential for establishing niche businesses. Niche businesses could revolve around pet products, pet-related apps, training courses, grooming services or pet insurance.
These are some examples of successful pet-related businesses:
- PupBox is a subscription service that sends pet owners toys, treats and training materials.
- Wagmo offers digital pet wellness and insurance services.
- Tractive is a pet GPS tracking app.
Pet care niche markets
When asked about a profitable niche business, Woodley referred to Diapers.com, explaining how it became successful by serving a large niche market. “Many niche businesses that fill a hole in the market no one previously recognized quickly come to be considered essential,” Woodley explained. “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.”
Here are some other successful baby care niche businesses:
- Nanit is a smart baby monitor with a community connection.
- Owlet provides socks for baby monitoring.
- Bark is an AI-based tool for parents to monitor their children’s internet usage.
To get an in-depth look into one company’s journey of establishing a business niche, check out the success story of Russell & Mackenna. This family-run company carved out a niche in the furniture business.
What is a niche strategy?
Now that you know what a niche market is and why it’s important, 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, 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.D
- 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 your audience is currently experiencing. Choose a sector that also has anticipated growth.
- Research your customer base. Walters and Woodley 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. While 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 advised creating a business plan in which you define precisely 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 fits a niche, your marketing efforts should also be focused. 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 that 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 customer. “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,” Woodley said.
How do you identify and dominate a business niche market?
Entrepreneurs should consider a few key consumer elements when trying to identify and dominate a niche market. Look for the following characteristics in your potential market audience:
- Easily identifiable customers: Potential customers who are easy to see are a hallmark of a great business niche. Jerry Rackley, director of marketing at HostBridge Technology, said that 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.”
- Easily accessible customers: For a business niche to be profitable, your potential customers must 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 goat herders 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.”
- 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 support an underserved or even neglected segment, said Cody McLain, chief visionary officer at WireFuseMedia and a host of the 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,” McLain explained. McLain suggests researching these markets in your industry as potential niches. “For example, in web hosting, you can use Google Analytics and [Google Ads] 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.” [Learn the Google Ads secrets that work for small businesses.]
- 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.” He 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, another critical characteristic of a profitable business niche.
Along with Google Analytics, use Google Trends and Google Keyword Planner to determine whether your potential niche would be in demand and to discover the target audience’s most common searches and pain points.
Find your business niche to succeed
Finding a niche perfectly suited to your business can help differentiate your brand, build a loyal customer base, reduce competition and increase profits. Identifying a perfect niche might not always be obvious, but once you research the market, target audience, and your business strengths and resources, you can narrow down your options and determine the optimal course of action.
With a defined niche strategy, niche marketing and enough business data, you can maximize your company’s chances for success.
Nadia Reckmann and Sarita Harbour contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.