Jeff Bezos had a vision to build an “everything store”—an internet company that sold nearly every product type all over the world. In 2020, it’s safe to say he was successful, as Amazon sells everything from web services for startups to Nicolas Cage pillowcases. But when Bezos launched Amazon 25 years ago, it was simply an online bookstore.
Amazon’s origins are a fitting case study in niche marketing. One of the best ways to launch a business is by identifying an underserved segment of the market and tailoring your products or services to them. We understand finding a niche market can be difficult, which is why we’re here to help. In this guide, we’re going to explain the benefits of niche marketing and show you how to find a niche market for your business. But first, let’s establish exactly what niche marketing is, and provide you with some examples of how it’s done.
What is a niche market?
A niche market is a subset of a market on which a particular product or service is focused. The market subset is usually based on five different market segments: geographic, demographic, firmographic, behavioral, and psychographic.
Geographic segmentation splits a market based on its geographical boundaries, and is based on the assumption that our location informs what we buy to some degree. Demographic segmentation identifies markets based on demographic information such as gender, age, and income level.
Firmographic segmentation separates a market based on company or organization attributes, such as industry location, headcount, and revenue. Psychographic segmentation is about finding a market based on attitudes, aspirations, and values. Finally, behavioral segmentation is based on observed actions, such as usage rate or purchase preferences.
Niche marketing examples
A niche market is typically composed of a combination of different market segments and will inform the features, price range, and quality of the product or service. Examples of niche markets include:
Owners who like to dress up their dogs (demographic, behavioral)
Parents of children with an upcoming bar/bat mitzvah (demographic, psychographic)
Actors/actresses in need of SEO services in New York (firmographic, psychographic, geographic)
Each of these examples is based around an established industry (pet care, party planning, and SEO) and narrowed down to cater to a specific need identified within the market.
A niche market can be broad (i.e. soccer fans, people in need of legal help). However, it behooves small business owners just starting out to have a niche market that is as focused as possible (i.e. fans of the soccer club Manchester United, car accident victims in Philadelphia). As the business grows, it can broaden its niche to cater to new opportunities.
It’s important to note that a business can also serve a broader audience than just its niche market. A law firm, for example, can do more than just work with car accident victims in Philadelphia. A niche marketing strategy is simply a way to leverage your expertise in one area to stand out from your competition.
A few examples of actual niche marketing companies include:
Square: This point of sale company offers simple software to many small businesses that were unable to process credit card payments or needed an easier way to handle these transactions.
Lululemon: This popular athletic and athleisure brand caters to women and men looking for trendy fitness apparel or comfortable loungewear.
Zen Courses: This online course-building company targets entrepreneurs and business owners who want to create their own workshops and courses, but aren’t sure how to get started.
Why you should find your niche market
As a small business owner, tailoring your business to meet a specific demand in the market has several key benefits, including:
While it may take time and money to drill down and find your specific market, working within and marketing to a niche market is usually cheaper and less time consuming than trying to appeal to a broader audience. This is because it takes less time and money to develop and market a product or service and provide customer service that caters to a smaller group of people.
“You can achieve brand saturation within a niche market in a way that you never could within a broad market without spending billions of dollars,” says Gerard Boucher, founder and CEO of social media marketing agency Boucher + Co.
A niche market is a niche market because it is underserved. Therefore, if you identify a niche market, there shouldn’t be a lot of competition. Reduced competition can be good because it allows you to run your business the way you want without having to worry that you are being undercut or outmaneuvered by a rival.
However, if you find a niche market with little competition, one of two things are likely to happen: You’ll foster competition by finding success in the market, or you’ll realize that there is no competition because the market is not lucrative enough (we’ll talk more about finding a lucrative market in the next section).
Because niche markets are small, businesses can more easily build brand loyalty by focusing on the quality of individual customer relationships. This can be done through more direct customer interactions, such as sending personalized emails and thank you cards, accommodating special requests, and offering custom services.
These types of actions foster repeat business, which is key to survival for any niche business.
If your business has a digital presence (and it should), niche marketing allows you to be hyper-focused on a few very specific keywords. This will help you rank highly in search engine results, which can be an enormous driver of traffic and sales. To help you get the most of your niche market from an SEO perspective, consider publishing content related to your niche.
Remember: Getting in front of the right people is better than getting in front of a lot of people who may not be interested in your business.
Highly targeted marketing
We mentioned that it is cheaper to market to a smaller number of people, but it is also more effective. That’s because the members of a niche market are more similar to each other, meaning it is possible to craft marketing content that will resonate with a larger segment of the desired population. A smaller market also makes it easier to judge the impact of your marketing efforts.
Another benefit of catering to a niche market is that people with similar interests tend to be in contact with each other. For example, fans of the television show “Game of Thrones” discuss their interest in online web communities. If you’re doing a good job, people in your niche will spread the word to others, which is the most powerful form of marketing there is.
Focus your efforts
Focusing on a niche market affords you the opportunity to become really good at one specific thing. The better you are at what you do, the more you are considered an expert or leader in your market. This becomes a self-fulfilling cycle, as more customers will want to buy or work with the most experienced or well-regarded business in the market.
Establish a foothold
Finally, if you’re just starting out, you’re focused on establishing your position in the market. By finding a niche, you are guaranteed at least some demand for your product. This can help you establish an identity and build the foundation to eventually expand into a larger market.
How to find a niche market
Now that we know the benefits of finding a niche market, let’s explore niche market opportunities for your business. If you’ve already launched your business, you may have considered some of these factors. If you’re looking for business ideas, identifying a niche market can be a great starting point.
1. Choose from your interests
No matter what type of business you want to launch, it helps to start by asking yourself what you are interested in. Take a piece of paper and write down all of your hobbies, passions, and skills.
Once you have a list, consider your most important personal achievements and life lessons, and your approach to solving problems. Also ask yourself who you want to do business with, and where you want to do business.
How do these things apply to each item in your list of hobbies, passions, and skills? Ideally, your idea will arise naturally when you look at the combination of these factors. For example, you may love clothing and care deeply about the environment, so you decide to launch a line of eco-friendly leisurewear.
Considering all these things will ensure you choose a direction that you will be truly invested in. This is important because you will be spending a lot of time and energy in this niche, and your passion for the business will be your main motivating factor. In addition, if you don’t care that much about your niche, your customers will sense it, and you will be seen as a phony.
2. Explore the potential market
Once you have discovered a niche that you are interested in, you need to determine if enough other people are interested in it that it can support a business. A great way to do this is by evaluating the internet and social media traffic around keywords related to your niche market.
There are several tools you can use to evaluate search volume for specific keywords:
Google AdWords Keyword Tool
While doing keyword research, keep in mind related terms that pop up, as these provide insight into other interests within your niche market. AdWords and UberSuggest also show you how competitive each keyword is. If there is a lot of competition, your market might not be as niche as you thought. Also keep in mind the popularity of keywords over time, as this can show you if interest is rising, falling, or seasonal.
Boucher says that if a keyword has under 500 searches per month, you are facing an uphill battle in terms of demand. “Ideally you want between 1,000 to2,000 searches per month. With a number like that, you can test your product without burning through cash,” he explains.
Checking social media websites like Facebook, Pinterest, and Reddit can also provide a window into the interest in a particular niche topic. Check to see if there are a significant number of people posting about your niche, and if there are online groups where people discuss topics related to your niche. These people make ideal targets if your business decides to launch a social media marketing campaign.
Another approach you can take is asking people who you think would be prospective customers what their impressions are of your business. This can help you refine your idea and make it more market-friendly.
Finally, if there is any competition in your niche market, research them. How do they rank in search results? Is their marketing effective? What can you do better than what they are doing? Answering these questions can help solidify your business idea.
3. Determine profitability
Once you’ve found a niche market you’re interested in and confirmed there is an audience, you need to determine if you can actually make money focusing on that market. Online this can be done by checking Amazon bestseller lists, affiliate marketplace product lists like ClickBank and ShareASale, and dropshipping marketplace bestseller lists.
Each of these platforms informs you of the popularity of specific products, as well as what they sell for, which can be valuable in determining your own price points.
Another approach you can take to determine your price point is through digital marketing. Boucher recommends launching a targeted social media marketing campaign featuring posts with different price points and comparing the engagement on each post.
“These online focus groups can inform you of which price is most palatable, as well as general consumer interest,” says Boucher. “And it can all be done for a few hundred dollars.”
4. Promote your product or service
Finally, you need to market your product, collect feedback based on your marketing, and re-tool accordingly. Fortunately, because your market is so small and specific, you shouldn’t have to go through many variations of your marketing because the audience already has a lot of similar interests.
Boucher recommends marketing initially on social media as it allows for greater targeting and the ability to test multiple iterations of the same ad. As with any marketing campaign, it takes multiple impressions for a consumer to have brand recall. However, with niche marketing, it is common for a larger segment of the market to convert once they have brand recall.
“A niche market could have 5% to 10% of consumers with brand recall convert, compared to 1% to 3% in a broader marketing campaign,” says Boucher.
The bottom line
In 2008, Wired Magazine co-founder Kevin Kelly popularized the idea of 1,000 True Fans. In short, the idea states that to be successful in any line of work, all you need is 1,000 loyal customers who will buy anything you produce. If you generate $100 profit from each fan, you will earn $100,000 annually.
When put into the context of niche marketing, this means identifying a profitable market and working to reach peak brand saturation within that market. If you can do this, 1,000 true fans is within reach, and possibly many, many more.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.