How to Find the Best and Most Profitable Market Niche for Your Products5 min read
The Best Markets aren’t the Biggest
It’s quite understandable for you to pick the largest possible market in which to sell your products. But if you’re a small business, the biggest markets aren’t necessarily the best.
The biggest markets may be the best known, but they are also the most exploited. In big markets you’ll find lots of competitors, more consumer resistance and lots of price competition.
If you’re not very careful your big market full of opportunities could become a wasteland for your business because no matter how much you try your battle with established competitors will be long and hard.
A Solution! – Niche Marketing
If you are a small business and you want to achieve rapid business growth the best strategy is to look for sales opportunities that you can convert better than your competitors. This is the main idea behind “Niche Marketing”
In this and a following article we’ll provide a five-step step plan for implementing a Niche Marketing Strategy.
Five Steps for Developing a Niche Marketing Strategy
The Five Steps of Niche Marketing are?
1. Divide your “large” market into smaller market segments
2. Identify business niche areas for your product within these segments
3. Research these niche areas and estimate their market potential
4. Build a profile of potential customers in these business niche areas
5. Develop a strong product proposition for these customers
In this article we’ll focus on steps 1 to 3.
1. Segment Your Market
Market segmentation has been around for a long time. You may even have already carried out some segmentation of your marketplace by deciding to focus your attention on a particular geographical area or socio-economic group (e.g. small businesses, young professionals, industry type etc.).
Now take your segmentation a stage further by looking at other ways in which you could divide up your marketplace. For example, a manufacturer of devices for petrol and diesel engines decided to segment its market into family automobiles, commercial vehicles and boats.
2. Identify Business Niche Areas
When you have a list of market segments bear in mind that even though you may think your product suitable for all the segments you’ve selected, in each segment they’ll be some groups of companies or individuals who will need and want your products and others that won’t.
These groups may be your first niche markets. For example, the manufacturer we talked about earlier decided that it would be better to focus on “family leisure boats” as a niche market rather than “high performance boats” because it had a lot of knowledge and experience of the types of engines used in leisure boats.
So, look for the business niche areas within each segment and find niches where you think your product will do well. Spend as much time on this as you can.
It’s not always easy to find niches in an existing market or to identify new winning niches in which to create a business. But fortunately there are a lot of online resources to help – local business directories, Internet directories, websites with information on trends and fashions. Also, large retail sites like Amazon and eBay provide information on market sectors and niches in which lots of their products and services are being sold.
In addition to using the Internet you may need to carry out some research on the telephone and in your local library, especially if your business is focused more on the local community rather than on the larger “global Internet” market.
3. Research Your Niche Areas
Once you have a list of niche markets in which you are reasonably confident you will need to estimate the size and business potential of each one. It’s easy to leave this step out, but if you do you could discover after spending a lot of money and doing a lot of work that you are trying to develop business in a niche which isn’t commercially viable.
Research each niche to find out about:
a) Likely level of customer demand
b) Commerciality (i.e. can you make money out of it?)
c) Niche Competition (who and how much)
One of the best niche strategy tools to help you with some of this research also happens to be free. It’s called the Google Keyword tool.
This Tool is most often used for internet-based businesses, but it can also be extremely useful for local businesses that market and sell off as well as on-line.
– Likely Demand for Your Product
Most consumers (domestic and business) today tend to use the internet to help them make decisions about what and where to buy. They do this by entering combinations of words and phrases (keywords) into Google and the other search engines hoping to retrieve helpful information. All the major search engines store these keywords in vast databases which can be interrogated to find how many people globally are searching for particular products or services.
This Tool will also provide you with ideas on other keywords and business niches that you might not have considered.
– Commercial Value
The Google Keyword Tool will also provide you with information on the commercial value of your niche. It does this by providing you with data on the prices that advertiser’s are willing to pay for Internet advertisements based on your keywords.
This whole area can be explored by spending some time investigating Google Ad words and Ad sense, but at this stage all you need to concentrate on are the Cost per Click (CPC) figures that the Google Keyword Tool provides.
You can find out about global and local competition in your chosen niches by using the Google Search Engine’s “Advanced Search” feature.
Use your keyword phrases in the search engine to get information about the volume of potential competition. Investigate the search results on the first few pages. These are the main competitors you’ll need to try and outmanoeuvre. If you are focused on local marketing use the advanced search feature to include other appropriate keywords such as your geographic location (e.g. “Oxford”).
When you are carrying out your research work, don’t forget that many of the companies that show up as competitors may not really be serious competition for you because although they are selling products to your niche, they might not be treating it as a specialist area.
4 & 5. Build a Customer Profile and Develop a Product Proposition
By this stage you’ll have a very good understanding of your niche market and can begin to build profiles of your likely customers in this niche and produce marketing and sales materials specifically tailored to their needs.
It’s at this stage that you really start to differentiate yourself from your competitors. The two steps you need to take to achieve this will be covered in our next article on niche marketing: “How to Find the Niche Customers that Want to Buy Your Products”
Expanding Your Niche Strategy
Once you have started to make progress selling your products in one niche start working on another niche. For each niche you will probably need to change your marketing materials and messages a little bit, but you’ll be building on a foundation of knowledge and experience which will enable you to develop your niche strategy very easily to include other suitable niche markets