The Importance of Niching for Startups and Small Business
Successful business owners online and off agree that “When you fail to plan, you plan to fail.”
What is the most crucial element of preparing a business plan?
You must first identify the niche or market you are going to enter!
The idea of niching down for smaller businesses is one fraught with questions and concerns:
- What if I choose the wrong niche?
- But I can help so many others with my product or service…why limit that?
Defining your target market will help you establish your niche. Knowing your niche and understanding your audience benefits your business strategy in a myriad of ways. It helps you develop a more strategic marketing plan, get the most out of your digital marketing spending, navigate niche marketing, and ultimately drive sales and grow your business into the revenue machine you want it to be.
In actuality, focusing on a niche can be so effective because it communicates to your audience you specialise in helping others just like them. By staking your claim, you are communicating that you are able to go a mile deep rather than just scratching the surface.
For many new or emerging businesses, by focusing on a niche you are able to create a growth engine to later expand your offering as your business grows. Unfortunately, some entrepreneurs rush headlong into starting a business before they have narrowed their niche market. That can be fatal to the success of your business in the long term.
“I’m not clear who my ideal client is or where to find them”.
Defining your ideal clients and knowing where to find them is critical at all stages of your business:
- whether you’re just starting to create it
- or you’ve been at it for several years and want to pivot your business model
- or simply if you’ve personally evolved in your life as an individual and as a result you need to realign your business with your new you.
“Niching Down” a Current Business to Discover New Opportunities
Perhaps you are not launching a new business. Maybe you have a business which is up and running. Whether your operation is successful or not, you could discover profitable new opportunities by narrowing your focus. On the other hand, you may simply want to define your marketplace in a much clearer manner. Both of these strategies provide possible business opportunities which may have been staring you in the face.
We mentioned in the introduction how important it is to build a niche market business. When you fight the mass-market, you are up against Goliaths which have already established themselves as leaders in your field. This makes it difficult to build a successful business presence in that market.
That is why you may want to take a second look at your current business model.
If you have a current list of customers or prospects in your field, ask their opinion. Tell them that you are looking to provide value to the marketplace. Ask them pointedly what accessories or extras could improve their customer experience. If you have several already in mind, ask them to rank those ideas.
You should also conduct a demographic study. This is where you take a look at your customer base and see exactly what they have in common. Why do they prefer your business or service over those offered by your competitors? Are your best and happiest customers in a particular age group, geographical region, or at a specific income level?
Think of your “perfect client” or customer. Why do you like working with them so much? What character traits do they display that you wish all of your customers and prospects possessed? Targeting just those types of customers and asking them what problems they have in their lives could reveal a niche marketing gold mine with a ready-made prospecting pool.
These questions provide valuable insights into your marketplace which can uncover new niche market opportunities.
Why Every New Business Needs to Find Its Niche Market
Finding your niche market helps you narrow down your ideal customer and develop the marketing strategies that will most appeal to them. Essentially, a target market helps you develop a strategy. Strategy, in turn, is essential for driving business, protecting your capital, and minimising risk.
When you start your new business or side hustle by determining your target market, you give yourself a specific consumer base that you want to center in your customer acquisition strategy. This will help you avoid common startup pitfalls in your early marketing efforts like pouring money into an unfocused marketing strategy that yields lackluster results.
Narrowing Down Your Niche
If you don’t narrow down your market significantly, you try to please too many people. This mass-market approach leaves you battling larger businesses that are already known as leaders in that particular field.
Successful niche marketing does not have to be a hit-or-miss proposition. You really can improve your odds of succeeding in business dramatically simply by following a proven niche selection process.
Should You Niche or Micro Niche?
By now, you understand the benefits of narrowing your business focus. But when should you stop “niching down” and launch your business? The opposite question is also a valid one. How do you know if you have narrowed your market enough?
To help you answer these questions you need to know the difference between niche marketing and micro niche marketing.
The Health and Wellness industry would be considered a mass-market. This contains all products and services related to emotional, mental and physical health and well-being. One specific niche market which is a subset of Health and Wellness is Alternative Healing.
This could include topics like Acupuncture, Acupressure, Meditation, Yoga, Herbal Remedies, and Aromatherapy among others. Those would be considered micro niches.
Once you recognise where your abilities intersect with your ambitions, you will know whether you should launch a niche business or a micro niche business. For instance, you may want to create a company that delivers general Alternative Healing products and solutions. This would be a niche company.
If your skills, interests, and aspirations are more suited for a specific alternative healing field like Aromatherapy, then operating a micro niche business is probably your best move.
Just remember that there is no “one-size-fits-all solution” when you are narrowing the focus of your business selection. Some entrepreneurs can be very happy and successful in delivering niche solutions for their customers. Still, others are more suited for niching down even further, providing very specific solutions to a small and clearly defined micro niche customer base.
A few more examples of niches and micro niches:
|Dog Food||German Shepherd Dog Food|
|Online Dating||Christian Dating Services|
|Health Insurance||Insurance for Baby Boomers|
As was mentioned above, many times micro niches can be narrowed down even further. Just be sure that if you decide to open a business specializing in organic food for German shepherds over 10 years of age (micro-micro niche), that there is enough of a marketplace to be profitable.
Will this step in the business niche selection process take some time? Undoubtedly it will. In every case, this is time well invested. The more time and thought you spend in the discovery step of the niche identification process, the more perfectly suited your business will be to your passions and abilities
While “finding your niche market” might sound like something you’d have to hire an expensive agency for, it’s actually a lot simpler than it might seem.
Here are actionable steps that you can take to establish your niche market.
1. Start Specific, Then Broaden Your Approach
Starting with a specific focus yields more actionable, reliable results than by asking yourself the broad question of “Who is my target market?” If you have an established business, look at the reality of your business and the people you serve right now, and what they have in common.
This advice can also be adopted if you have a product/service prototype or an online following that has not yet established its product offerings. You can start with your prototype and begin to inquire, “Who is drawn to this product/service? What am I offering that is different?”
2. Analyse the Total Market Conditions
Once you have nailed down a cursory sense of what is compelling about your business and the audience you expect will respond to it, you want to understand what the overall market for your product is. A market analysis, which is the larger process of assessing the dynamics within a particular industry, can be helpful. You want to know what the total market potential is and how your industry is trending.
3. Reference Your Competitors
Your competitors’ marketing can tell you a lot about your target market. If you anticipate that you’ll share the same target audience as your competitors, you can glean a great deal of information about what their audience is responding to. Look for other brands in your niche and analyse their marketing strategies. What does their website say? Who are they targeting? What channels do they use? Who are their competitors?
Conversely, your competitors may have left a hole in the market, creating an opportunity for you to address an underserved customer. If this is the case, you can collect the common marketing strategies shared by your competitors. Later, you can test different marketing approaches to see what connects with your target customer.
4. Rely on Findings from Your Market Research
Market research gives you a plethora of information that can help you readily and accurately pinpoint your target market, especially when it comes to market segmentation. Customer Surveys can provide a good deal of demographic information on your target audience, and customer interviews can be treasure troves of information about behavioral and psychographic segments.
We cover more about market segmentation (what it is and how to use it) below, but if you have completed robust market research, you’ll already be a step ahead of the game.
5. Draw on Information From Social Media
If you already have a social media following, you already have information about your target audience. If you don’t have a social media following, you can reference competitors to see the types of people who are not only following but engaging with their posts.
6. Analyse Your Current Customer Base (If Applicable)
If you already have a current customer base, analyse what you know about them. What do they have in common? Do they share certain demographic information, hold similar beliefs, or tend to cluster in a specific geographic area? You likely already have the information necessary to identify your target audience. It’s just a question of effectively gathering and analysing the data.
Take the following steps to determine your chances for financial success in your chosen market
Let Google Do the Work
Google is far and away the most popular search engine in the world. Used properly, it can reveal some relevant information concerning the potential profitability of any business.
Here is what you do:
Type the general name of your niche into Google’s search engine, without any quotation marks. A recent search for “Christian dating services” turned up more than 8.8 million results. It is going to be hard to break into such a large market. However, Googling “Christian dating services for baby boomers” returned just 172,000 results. Try to aim for markets that deliver less than 200,000 results.
Repeat the process just described. This time, look above and to the right hand side of the Google search results (depending on your browser set up). You will see listings marked by a yellow “Ad” or “Ads” icon. If there are several companies advertising services in your niche marketplace, that is a great sign. This is where Google places paid advertisements. If companies are willing to pay for expensive Google pay-per-click (PPC) advertisements, there is money to be made in that market.
Type industry-specific keywords and phrases into Google’s search engine, with quotation marks surrounding them. Using the above example, “Christian dating services for baby boomers” returns just 5 results! This tells you it would be very easy to rank web pages using that specific keyword phrase. Do this for other important words and phrases that you think people might be searching for in your niche.
Google Ads Keyword Planner shows you how many people search for certain phrases and words every month. Select “Get search volume data and trends”. Under “Option 1: Enter keywords”, list the keywords you are researching. Click on the blue “Get search volume” button. You will see the average monthly search volume for those terms. Google also reveals whether your competition is easy, medium, or hard, and they suggest pay-per-click bids if you want to advertise with Google. (Monthly search volume above 1,000 is a minimum recommendation per keyword or phrase.)
Type your niche market name followed by the words “affiliate program” into Google, without the quotation marks. If there are companies paying affiliates commissions to sell goods and services in your niche market, you know those companies are making money.
Head Over to Amazon and YouTube
Former Google Executive Chairman, Eric Schmidt, stated that, “Really, our biggest search competitor is Amazon.” You may have heard that YouTube is the second largest search engine in the world. This is true, but here is something you may not have known … Google owns YouTube. So the largest competitive search engine as far as Google is concerned isn’t YouTube. It is Amazon.
That means you should type your business niche into Amazon and see how many products, services, and books are listed. Several thousand listings reveal a potentially profitable market. Whether you are opening an online or off-line business, using Google and Amazon to explore your marketplace is a smart move.
The same is true for YouTube. The YouTube search engine provides video tips, strategies, product specifics, and service ideas you can use in your own business. Again, you want several thousand YouTube search engine results to identify a niche where customers are spending money.
Other Profitability Considerations
I mentioned above how to use Google and the Google Ads Keyword Planner to uncover your level of competition. You can also check the first couple of pages of Google search results when you search for the name of your niche market. These are the companies which Google finds most relevant to people searching for products, services, and solutions in that niche.
Spend some time looking at these websites. What do they have in common? What are they not doing very well? Pretend you are a customer in your niche market and see how you feel about those companies. This can quickly tell you how difficult or easy it will be to compete in this particular niche.
If every business listed on the first couple of pages of Google search results for your niche market is a big, recognizable brand name, you may have trouble competing in that industry.
Understanding Your Demographics
Alexa and Quantcast are online tools that reveal a wealth of demographic information concerning your niche. This is extremely important knowledge you cannot live without. You may find that a particular market has tens of thousands of web searches each month.
Unfortunately, if your customer demographics reveal a low-income level and you are offering an expensive product, your business may be doomed before you get started.
Online and off-line trade journals, magazines, groups, forums, “meetup” groups, and industry-specific organizations are all excellent resources for understanding the demographics that make up your marketplace.
Product or Service Availability and Future
Try to find out if a similar or identical service to the one you are offering is available locally. If you have to battle a big retail chain with thousands of national outlets, you are going to have serious business problems.
The opposite is also true. If you are the only place to turn to for a unique niche offering, you will probably find sales and profitability relatively easy to come by.
At Marketing Mentors, our focus is to help you nail your niche. In other words, to know WHO your ideal clients are and WHERE to find them!
If you are interested in learning more about what it’s like to work with us please book a quick discovery call: BOOK A DISCOVERY CALL