A niche market is a segment of a larger market that has unique needs and preferences. A niche strategy focuses on the individuals in this segment to market and sell a product or service that’s specifically targeted to appeal to them.
Identifying and targeting a market niche is a business strategy that seeks to grow market share and reduce price competition by offering specialised products and services that closely meet buyer needs. By targeting a unique audience, businesses can focus their efforts on a specific market segment and reduce the competitor pressure they face.
For example, everyone must buy food to eat – but there are several niche markets that consumers purchasing food might fall into. Excluding the actual food products we buy, today’s consumers are deciding between premium and discount brands, and vegetarian, vegan, organic, gluten-free and sustainably sourced options, to name a few.
As buyer expectations continue to evolve, nearly every market can be further refined by identifying niche audiences. Some common ways to identify and define a niche market might be by:
- Demographics (income, gender, age, education level or family status)
- Expected product or service quality (from ultra-premium to economy)
- Buyer values (sustainable, ethically sourced, biodegradable, etc.)
What are examples of niche markets?
Today, shoppers are looking to purchase products from and build relationships with businesses that demonstrate an interest in and understanding of who they are. Some of the niche audiences that might exist within your market segment include:
- Environmentally conscious consumers: These shoppers are willing to pay a premium for sustainable products and services. For example, they’ll opt to spend more to purchase eggs from free-range chickens.
- Remote workers: The COVID-19 pandemic has meant many of us are working from home more regularly and searching for products and services to help us do this more effectively. This niche might be spending on home office furniture, noise-cancelling headphones, or productivity tools, for example.
- Health and fitness-focused individuals: The health and fitness industry is vast and highly profitable. You could further segment this niche by offering a high-protein, low-carb meal delivery service, or go even further and create a vegan offering.
- Pet owners: People with pets spend lots of money on everything from food and toys to beds and kennels. Many businesses have successfully targeted niches based on an all-natural product promise or zoning in on a specific breed.
How to find a niche market for your business
1. Identify your strengths and passions
Finding a profitable niche is important, but finding something you’re good at – and genuinely enjoy doing – is even more critical. There may be great profit margins available for businesses who import high-end homewares from Indonesia, but if you have no interest or experience with interiors or styling, it’s unlikely to be the niche for you.
Running a business can be tough – if you’re working in an area you don’t really care about, it could be difficult to stay motivated if you go through a challenging time. Think about how you like to spend your free time, aspects that family or friends seek your help with, or anything you’re particularly knowledgeable about.
2. Research the market
Once you’ve pulled together a shortlist of potential niches, you need to establish whether there’s demand for your product or service idea. Conduct a SWOT analysis to understand the opportunities and threats inherent in your target market.
Hit Google and explore their suggestions to understand what customers are searching for and review the top paid-for and organic results – these businesses are your potential competitors. Social media is also a great resource – what hashtags are market leaders, affiliates and others using?
3. Test your idea
Once you’ve established that there’s a niche market for your product or service, you need to validate that people will actually buy what you’re offering. A crowdfunding campaign on a site like Pozible or Kickstarter will show you whether people are willing to pay for what you’re offering. Dropshipping is another low-cost way to gauge interest and collect feedback initially, allowing you to refine your offer before officially launching your new niche product.
How to market to a niche market
1. Know your niche market inside out
This speaks to basing your niche strategy on something you’re passionate about. Take the time to get to know and understand your target niche so you can market to them authentically.
2. Show your target audience how you solve their problems
Make it abundantly clear how you meet your niche’s specific needs. User reviews, user-generated social content and working with respected niche influencers and affiliates are effective ways to do this.
3. Consider PPC advertising
Use the outcomes of your Google research to create pay-per-click (PPC) advertisements via Google AdWords. PPC advertising is an effective way to reach your target audience based on the search terms they’re using, particularly if you’re a new business.
4. Keep an eye on your competitors
As a niche business, you should always know what your competitors are doing. Keep track of what’s happening in your specific niche, but also more broadly – the threat of new entrants is always there. Stay current with what comes up for the keywords and social hashtags you associate with your business (free), or use a paid tool like SEM Rush or WordStream to access detailed reporting and analytics.
If you’re looking for a way to differentiate your brand and build deeper relationships with your customers, a niche market strategy could be the way to go. Executed correctly, a niche strategy will allow you to outperform the competition, enjoy higher profits and build an engaged tribe of loyal customers.