The type of customers you have determines what kind of products you sell, where you sell them, your pricing strategy and how you promote your business. Even if you have segmented your target audience, you may find that there are subsets of those segments that have unique needs or behaviors. These are niche markets.
Understanding what niche markets are and defining your niche market can help your business cater to your customers more effectively.
What Are Niche Markets?
When narrowing down your target market, you will need to segment it by geography, demographics, psychographics and behavior. However, even when segmenting your target market, you may have specific subsets of the audience that have different needs from everyone else. A niche market is a small section of a larger market that has specific preferences that may be different from the larger market.
Consider a business that sells jackets for women. Its target market may be women from 35 to 55 who live in the city and make over $65,000 annually. However, the store may also have niche markets within that target market — for example, women who want vegan jackets made without any animal skin or women who are over 6-foot tall.
Different subsets of the market have very specific requirements for products that differ from the larger target market. Some of the ways to define a niche within a larger market include:
- Need: The niche has a specific problem it is looking to solve. For example, the niche market for a pet-food store may be looking specifically for food that is for pets on a raw-food diet.
- Demographic: The niche is a different age, income level, education level or gender than the target market. For example, the niche market for a women’s gym may be female teenage athletes.
- Quality: The niche wants higher or lower quality than the target market. For example, the niche market for a bakery may be people who want gluten-free, hand-crafted bread.
- Geographic: The niche lives in a different location than the target market. For example, the niche market for a comic book store may be people in a different country who can only access the store via the web.
- Psychographic: The niche has different values than the target market. For example, the niche market for a shoe store may be people who are environmentally conscious and don’t want any single-use plastic packaging.
Understanding the Need for Niche Markets
There are many benefits to defining a niche market for your business. One of the key advantages is that you can reduce the amount of competition your business has if you niche down to a specific subset of the target audience. If you offer niche products and your competition doesn’t, you’ll be able to gain a foothold in that section of the market.
Another reason to target a niche market is that it helps your business develop expertise in a specific area. If you run a grocery store and only offer organic products, for example, your customers will start to see you as the credible and reliable source for all of their organic-product needs. This also helps you to gain recommendations and referrals to new customers.
Niching down to a subset of the market may help you reduce your resources and expenses. Appealing to a larger customer base often requires more time and effort for operations, marketing and product development, as you may be catering to several different types of customer needs. When you’re only aiming to meet one specific need, however, you can optimize your resources.
Defining Your Niche Market
Identifying and defining the niche market for your business requires research, testing and adjusting:
- Know your differentiators: Begin by outlining the strengths of your business. What problems can you solve for your customers, and what can you do better than any of your competitors?
- Conduct industry analysis: In order to find a profitable niche business, it’s important to see what consumers are looking for in your industry. Check out websites and stores for other niche players in your industry. Look at the niche categories for your industry on Amazon or use an online keyword tool to understand what prospects are searching for online. This will give you an idea of how much interest there is in a particular niche.
- Understand your consumer: Identifying your niche market requires in-depth research on your consumers. If you have a business already, you can begin by segmenting your current clientele geographically, demographically, psychographically or behaviorally. If you haven’t yet started your business, consider hosting a focus group with your target market to understand its needs on a detailed level.
- Test and adjust: Sometimes, a business has to test a particular niche market, learn what works and what doesn’t and then tweak its business accordingly. Small changes to the product or the messaging can make a big difference with your niche audience. Other times, different niches can emerge through testing, and you may find that you have more than one niche to which you can cater with the same product.
Once you have identified and defined your niche market, it’s important to develop a full audience persona. This is a reference tool that outlines everything about your ideal customers, including their demographic qualities, where they like to shop, how they prefer to communicate with businesses and what motivates them. The audience persona should also clearly identify the unique problem that this niche market faces and how your business can solve this problem better than anyone else.
Figuring Out Where to Sell to a Niche Market
Keep in mind that the size of niche markets is usually smaller than large target markets. This means that you have a smaller pool of customers who are interested in buying your products. As a result of this small target market, where you sell your products is a key element that leads to your success.
Your options for location need not be limited to a retail store or an ecommerce store/online business. You can also sell your products by partnering with other retail locations or visiting pop-up shops and temporary markets.
In developing the audience persona for your niche market, pay close attention to where your customers want to shop. Are your potential customers interested in touching and seeing the product in person before they buy it, or do they prefer ordering online and having the option of shipping the product straight to their home?
Creating a Community for Your Niche Market
Since niche markets are small in size, it’s easier to create tight-knit communities. Creating a space where your niche market can come together and talk about similar interests is a great way to build brand loyalty and set up your business as the go-to expert in the industry.
Consider using a content marketing strategy to show your community how helpful your business can be. If you run a store for knitting and crocheting supplies, for example, a blog with weekly tips on selecting the right yarn or making difficult patterns may bring new visitors to your website. If you run a used bookstore, you can make short video reviews of popular books to help buyers make a decision about what they want to read next. Niche marketing is required for niche markets.
Social media is a great space to bring niche-market communities together. Consider creating a Facebook group where people in your niche community can share stories and ask questions. Remember to keep this space free from sales-oriented posts. Building a community is not about selling to your niche market; it’s about sharing a passion and bringing people together.