Very rarely can a business be everything to everyone. For every Coca-Cola type business, there are 6 or 7 other businesses that serve niches within a market and are still very successful. Many businesses start entirely as niche businesses and then grow with the market. Sometimes businesses within markets find a niche that is both underserved and lucrative. Whichever the approach for your business, finding a distinct market segment and catering to its specific needs can mean great profitability for you. This article is about identifying, exploring and serving a market niche.
Niche markets are attractive for various reasons, chief amongst them is that the members of a niche are usually willing to pay a premium to get the product just the way they want it. A good example of this are gamers in the laptop market. Gaming laptops tend to be very expensive machines but gamers happily pay the premium for machines that are more powerful. We have moved from a time where gamers used to build their own laptops to the age of companies such as Razer make gaming laptops and phones for the market. Generally, a market niche worth exploring is created by the combination of a demographic and a problem. People who like to play games on laptops but can’t buy powerful machines off the shelf, working women who want comfortable clothing and families with working parents are great examples of this. A little more on why these two characteristics are very important later on.
Start with why
As highlighted earlier niches tend to be created by the cross-section of a demographic and a shortcoming in the product offering. That, of course, is not enough in itself to indicate that the niche should be explored. Ideally, the problem the demographic are dealing with should be an absolute need that is not addressed by current offerings. One of the best ways of spotting a profitable niche is where consumers spend extra money to bring the product to purpose or combine with other products. Jik after years of observing that customers mixed Jik into their household cleaners created their own household cleaner. All this to say first look at the reason the group is dissatisfied. Wants will get a lot of complaints but little action. Needs will be moved upon even without help from the product provider.
Survey target market
The next step is to survey the target market and to understand them deeper. As I already said not every complaint will be moved upon. There may be external factors not immediately apparent that constrain the target niche. I’m sure everybody wants faster more reliable internet but not everybody is willing to pay a premium for it. If you have identified a demographic for your niche this process is easier for you because not only do you know who you’re looking for but more likely than not you know where to find them. Collecting as much data as is legally possible and having that data analysed by someone who knows data analytics well is helpful.
Research competition
As mentioned earlier the best market niches to explore are existent within the market already but are underserved. So researching the competition for your niche product is of course very important. I also mentioned that you will find that the niches you want are those already spending money to bring the product to a condition fit for usage. With all this in mind, you are looking to understand where and how the competition is falling short and how it is being addressed.
Assess profitability
Sticking with the idea of customers already spending money to bring the product to purpose assessing the profitability of the niche comes next. Can you bring the product to purpose at a lower price than they are already paying to do so? Bringing back the gaming laptop example, a manufacturer buys RAM and Graphic cards in quantities of hundreds of thousands or millions and can therefore certainly get them cheaper than individuals. If we include installation costs they certainly can provide the same value at a lower price. So it’s clear there is a good sign of profitability there. Serving niches is great but remember the size of the niche opportunity also determines if it is worth doing.
Test
While some products can be an instant hit that is rarely the case for many products. You may have to go through a process of iteration to get the product right. Start with 100 to 1000 units to determine how well your product is suited to the niche. Request feedback and actually use it to improve the.product. Test the price and test it in different geographical locations. This is where, if you are new in the market entirely you will start getting ideas about what works in the market and how it works.
Some of these steps are quite complex and it would be very difficult to give a guideline as to how long each step would take. The idea is to get it right, not to get it done right now.