Niche means a distinct segment within the market, generally a targetable part of a market where the customer demand is still unmet. An example of finding a niche in the market successfully is to offer a product for sale in a geographical location where it was previously unavailable. Establishing a niche market business allows you to tap into a customer base that has been overlooked, or is underserved. It often becomes very successful as it is focused on a narrow group with specific needs being met.
When opening up an ecommerce venture, your success can depend on finding the right niche in the market to fill. There is no point in simply offering something that customers already have or can already access for the same price as your own product; just like competition on the high street, your venture will only become a real success when you offer something that is newer and better than ever before.
What does niche mean?
In some cases entering a niche market can also be a jumping off point to access a larger market. If you see success within a narrow niche, you can begin adding additional complimentary products or services. Because you already have an established customer base, these new areas can grow much faster than they would when starting from scratch.
Starting a niche business has its pros and cons. Niche marketing is all about specialization and it plays a crucial role in attracting your customers.
For example, your cat is sick and you live in a neighborhood with two clinics. One has a general vet while the other has a vet who specializes in treating cats. Whom will you go to? If I were you, I would choose the latter. That is basically the difference between a general market and a niche market.
That being said, it’s evident that people seek specialists over generalists.
Now let's dive into the pros and cons of the niche businesses.
What are the pros of niche businesses?
Since you are a targeting a smaller, specific market, chances are that there is either less or zero competition. It’s also much easier to connect with the target audience when you specialize in a particular niche.
With niche marketing, you can get more bounce to the ounce and save big on your marketing plans. Don’t spend all your money by sending out flyers and brochures to everyone but instead, concentrate on your target audience. Also, the cost per conversion for niche businesses is significantly lower.
The customer is king and if they’re happy, then worry no more. If the customers love your products or services and feel that it caters to their expectations, then they will surely come back for more. It’s also possible that your market will also grow from word-of-mouth referrals and recommendations of your brand to their networks.
What are the cons of niche businesses?
Less potential for growth
This is debatable but unless you’re #1 in your niche, only a small portion of the market will buy your product and hence the profit margin may not be as large as you expected. If you don’t expand based on market needs, your products/services and the growth will be hindered.
Dealing with the big shots
After you have established your business, and earn a good profit, the big companies will start to notice. As soon as they do that, they may incorporate your niche products into their services as well. Once this happens, brace yourselves for some tough competition from the major players.
Factors to consider before entering the niche market
Before you define your niche market, you need to consider several factors and study the niche very carefully. It might take you weeks, months or even years to figure out the X-factor product(s). But once you’ve figured that out, you're all set to enter the real world.
After creating your niche product, you need to put on your marketing cap and brand yourself. For that, here are the following factors to consider.
Let’s get started!
Make a list of the groups of people that you are targeting
Prior to making a list, you need to consider several factors like geographic location, different types of consumers, age group, gender, or specific needs.
For instance, targeting brides is too broad of a range – a niche market should target dresses for beach weddings or hand painted bridal veils for the artsy bride.
Another example would be targeting small boutiques located in LA and providing a personalized shopping experience for females between the ages of 18-40 with a minimum income of $50,000 a year. This specialized market is very small and caters to a specific group of people.
Research more on your target audience/potential customers
Once you have created the list of groups of people who will be your potential customers, you need to do some homework on them as well.
You can start by talking to one of your potential customers. Find out what he/she is exactly looking for and emerge with a panacea for their specific needs.
If your niche is patio chairs, then your clientele will mostly consist of middle-to-upper class. Some would own houses, while some would own condos with large balconies which create enough space to set up patio furniture. You could ask your potential customer what kind of setting he or she has and cater to them with customized patio furniture.
Find out the product preferences of your potential customers
This is an important factor that you should pay heed to. Always think from the customer's’ perspective. The question is – What do they want?
Do they want high quality or medium quality? Low price or reasonable rates? What kind of features do they seek? Is warranty a prime factor? What color schemes would they prefer? You should be able to identify with your clientele when it comes to these preferences.
If you are selling antique furniture, here are some influential factors- the price, the history or context of a piece, the color, the design, exclusivity or functionality? You should find out what characteristic your customer values the most.
Study the market and gain more loyal clientele
Try to scout more information about your potential customers, production costs, marketing costs, and most importantly about your competitor’s products before launching your product in the market.
This will help us to identify the audience to whom the marketing efforts need not be focused. This can save you time and money through advertisements and marketing plans.
Simple things like having a chat with your potential client, browsing through stores and magazines that are relatable to your niche and even a search query on Google about your product can help you understand the prospective market of your product.
If you wish to sell homemade bath products, you can easily spot your target audience – people with allergies, people with a huge liking for homemade products, vegans etc. Word-of-mouth and internet marketing can help you grow and earn loyal customers.
These are the few basic things that you should know about niche marketing. What’s important is that you should overcome these hurdles and find success.
Nobody can make a fortune without putting in any effort. So, with enough planning, marketing strategies, and loyal customers, your niche business can definitely flourish and make it big.
For further references about the topic, here are some articles you should definitely check out: