What is a niche market?
A niche market is a specific part of a wider market, with its own unique characteristics and identity.
There are several good reasons to have a niche:
1. It helps you to target your marketing because you can focus your efforts on helping a smaller, defined group instead of being general and potentially generic
2. You can focus on your customers’ specific needs
3. It helps you to better deliver your services because you understand your market and can refine your offering to deliver exactly what they need
4. As an expert with valuable knowledge of a specific market, you may be able to charge more
5. You will stand out from the crowd. As an expert, you can build a reputation and become the ‘go to’ person within your niche
Having a niche market is one strategy, but only one. Every business is different and it may not suit yours. There can also be downsides to the approach (see section below on ‘downsides’).
Better marketing and efficiencies
If you only need to market to one defined group, or set of needs, it may be easier to develop tighter messages that resonate, rather than using a scattergun approach that may fail to reach any target.
Consider the relative impact of the marketing messages “we sell lighting” and “we sell reading lights for bookworms that will allow you to read in bed without disturbing your partner”. When you’re clear on what you’re selling and who you’re selling to, it’s easier to picture them using your products.
Whilst you might market to a single niche, this doesn’t prevent you from taking on other customers, where your products or services can help them too.
The value of being an expert
You may already have expertise in a particular area. Perhaps you’re a tax accountant who understands the intricacies of farming and the associated tax law surrounding herd accounting and profits averaging. This is much more valuable to farming businesses than a general accountant who won’t have this specialist knowledge at their fingertips - and so the farming expert may be able to charge a premium.
Standing out from the competition
Becoming an expert in your niche will enable you to stand out from the competition. Your in-depth understanding of a niche will allow you to demonstrate why you and your business are head and shoulders above non-specialists.
A lighting business, specialising in exhibition lighting, would be able to advise on the best setup for a stand. It may also have some experience of the different exhibition centres, including how easy it is to get lighting and other equipment in and out of the venue.
The deeper your niche, the more your specific expertise may appeal to a certain set of customers. For instance, if our exhibition lighting business has in-depth knowledge of a particular exhibition centre in the Midlands, they can add even more value, for that specific market.
Your knowledge may save customers in that niche a lot of time and money. They may think it’s worth paying a slightly higher price for the expertise. Specialist knowledge can also lead to more referrals from customers who appreciate the benefits of working with an expert in their area.
Downsides to having a niche
It’s worth noting that the more specific a market niche, the smaller the customer base may be. The pool of people wanting to buy your product or service may be restricted.
Apart from a potentially smaller customer base, it might also mean that for a product, you’re producing in relatively small batches, which could be more expensive per unit than larger scale production.
Also to consider, what happens if the target market dries up or disappears overnight?
How do you choose a niche?
Perhaps you have specialist knowledge of a particular product or market? Or you might choose to export to a particular country because you speak the language, have connections there, and understand the local sales taxes and import documentation and codes required.
Have a look at your existing customers and see what they have in common. Is there a section of your client or product base that excites you more or is more profitable? Is there a lucrative gap in the market which your business can fill? Or perhaps there’s a niche in a market which you identify with personally, for example busy mums or vinyasa yoga.
Whether you’re a travel agent or a health destination, the yoga market could be a potential niche market.
What does the market look like?
While there may be a need for what you sell, there must also be the willingness and ability to pay. How much real demand do you think there is? It can be wise to test the market demand before launching your business or product. You may want to talk with a range of potential customers and conduct market research.
What does the competition look like? Is there space for you in the market? On a basic level, you could google typical search terms to see what competition there is, in and around your chosen target market.
You could use Google Keyword Planner and Amazon to explore the kind of products and services that people are looking for and the levels of demand.
Test out your product
Create a webpage and a paid ads campaign and test the water. See how much interest is out there before you fully jump in the market.