One of the most ever intriguing questions of any generation is “would you rather be a generalist or a specialist?” While a generalist can do everything decently, a specialist does one thing extremely well. The same dilemma holds true when you’re a small business owner. Should one cater to a large market or a niche market?
A niche market refers to a segment of a larger market that caters to a specific group of consumers with unique needs and preferences. Unlike mass markets, which aim to appeal to a wide range of consumers, niche markets focus on serving a specific and well-defined segment of the population.
From your unique value proposition, positioning yourself as the go-to brand for a specific audience within your niche market will help you establish brand credibility over competing generalists and build a loyal customer base. In this article, we will delve into the world of niche markets, exploring what they are, how you can identify a niche market you can master and that has a viable audience of customers and how to market to it.
What is a niche market?
A niche market is a market segment within a broader market that can be defined and segmented by needs, interests, geography or other identities. something that sets it apart from the rest of the market as a whole.
For example, within the food and beverage (F&B) market, there are many different market segments or niches. Fat-free beverages can be a niche market.
Choosing to focus on a niche market means that the business will serve a certain target group, at which point the business will have more advantages than competitors who are targeting large markets.
Niche business examples
Here are some examples of niche businesses:
- Specialty food stores: A store that specializes in selling a particular type of food, such as gluten-free or imported organic products.
- Pet grooming services: A business that provides grooming services for dogs only, such as bathing, clipping, and styling.
- Handmade crafts: A business that sells handmade items such as jewelry, clothing, or home decor.
- Eco-friendly products: A business that specializes in selling environmentally-friendly products such as reusable bags, biodegradable cleaning products, and sustainable clothing.
- Fitness studios: A business that offers specialized workout classes such as yoga, Pilates, or kickboxing.
- Outdoor gear: A business that sells specialized outdoor gear such as camping equipment, backpacks, and hiking boots.
- Artisanal products: A business that sells unique, handcrafted products such as soap, candles, or pottery.
- Vintage and retro products: A business that sells vintage and retro items such as clothing, furniture, or home decor.
How to identify your niche market
Choosing a niche gives your online business a competitive edge from the get-go. Even when you have already established a business, narrowing down your target market can help you stand out in a crowded product category or market and increase your brand exposure. Here are step by step methods for identifying your niche market:
Step 1: Reflect on your unique selling points
A Unique Selling Proposition, often called a USP, is the “x-factor” that makes your business stand out from the competition. Your product or business model’s defining feature or features is the distinct advantage you have over other businesses that provide similar products or services.
For example, fashion and apparel is not a niche market. It is an industry or a large market. A segment of that market could be “customizable clothing for plus size women”. A compelling Unique Selling Proposition considers what your audience cares about and what your brand has to offer to help solve their pain points.
Reflecting on your unique selling points (USPs) can help you differentiate yourself from others and identify your strengths. To do this, follow these steps:
- Write down your skills and qualities: Make a list of your skills, experiences, and personal qualities that you feel are unique to you.
- Analyze your experiences: Think about the experiences and projects you have worked on and highlight any achievements or areas where you have excelled.
- Get feedback from others: Ask family, friends, colleagues, or mentors for their perspective on your strengths and how they see you differentiating yourself from others.
- Evaluate market demand: Consider what the market or industry you want to work in values and look for opportunities to highlight your USPs in a way that resonates with your target audience.
- Refine your list: Based on the information you have gathered, refine your list of USPs to focus on the strengths that are most relevant and unique to you.
- Use your USPs in your personal branding: Once you have identified your USPs, make sure to incorporate them into your personal branding and marketing materials, such as your resume, LinkedIn profile, and cover letters.
Following the steps above will help you identify your core strengths. This allows you to build a niche market idea you already love.
Step 2: Specify your target audience
At this opening, you need to clearly define background information such as who you want to do business with or cooperate with, who to sell to, or what type of business (model) you are aiming for. You need to be specific about the portrait of the target customer groups that you will serve them.
If you look at the market, you will find that there is rarely a product that is “for everyone”.
Also, because you’re building an outreach strategy for a niche market – a narrowed down market–your target audience’s portrait needs to be specific.
For example, instead of choosing your target group as Gen Z, you need to detail a Gen Z audience, such as their gender, income, location, spending habits etc.
Conducting market research will help you determine the buying behaviours and challenges of customers.
Step 3: Research the competition
Knowing who you will be up against will help you better prepare and equip yourself when you enter a niche market. The best way to start brainstorming niche ideas is by understanding what other online retailers are selling in a product category or to a certain audience.
Starting your niche selection with Google Trends is a great way to get the lay of the land. What’s best is that this tool is completely free and therefore it is an ideal place to get started on your research.
Let’s say “waterproof shoes” from the footwear market. A competitive research tool like Google Trends helps you know how frequently people search for this term.
As you can see below, the interest in the term has been rising steadily for the past 5 years in Canada.
Step 4: Define your niche product and service
If you’re dedicating your resources and time to a small or medium business, it should have the ability to become profitable and sustainable. Overall, markets can be segmented into different niches or segments according to needs and preferences. You can identify your niche products based on:
- Price (high, moderate, cheap): Do you want to sell luxury items or will you price them moderately?
- Demographics (gender, age, income level, education level): What’s their age range, education, and income level?
- Quality level (premium, handmade, economical): Is your product handmade, eco-friendly, or premium?
- Psychology (values, preferences, attitudes): Are you targeting vegans, environmental enthusiasts, travelers, or sports lovers?
- Geography (residents of a country, city or even neighboring regions): Where is your target audience? Are they in a certain country or region?
After doing competitor research, you will have a better understanding of how much your product and service should be priced in order to stand out to your target market. It’s important to understand your customer value in order to know your competitive edge.
Resources like Amazon (for products), G2 (for software), agency directories (for services), and PRICEFY.IO (for price monitoring) are helpful in evaluating competitor pricing and determining prices for your products and services.
Step 5: Test your product or service
Once you have identified a niche market for your business and what you can offer, it is time to bring your product or service to market. You can implement a soft launch or offer a free trial to see how much your target audience is interested in your product or service. This initial test period should not cost a large amount of money. However, you can certainly use paid ads to drive traffic to your website to increase awareness and exposure.
If the test does not generate the result you desire, don’t scratch the whole idea. You can alway go back to the previous steps and identify areas of improvement to better target your niche market.
Why targeting niche market is preferred over targeting mass market
In such a large and crowded mass market, products or services tend to become commoditized in terms of usage and features.
Take for example coffee, rice or pepper, which have been common commodities for decades until some businesses or competitors realize that their customers have more needs instead of the mindset that “coffee is coffee”.
In this context, finding a new niche market or a segment in which customers are still not well met their (basic) needs is a very wise strategy that businesses can consider.
While the number of customers in that niche may be less, the business will be less competitive and may find it easier to become a market leader through differentiated products.
Related to this strategy, when it comes to SEO activities. If you can find relevant (usually long-tail) keywords that most other websites aren’t already using, you have more ways to tank on top of search engines and get discovered by your target customers.
Carving out a niche market and catering to it can help your business grow sustainably with increased brand trust and customer loyalty. Once you have established yourself in your target market, it’s important to utilize different marketing strategies to communicate and nurture your relationships with your customer base and stay up to date with market trends and insights in order to stay relevant.