‘Why didn’t I think of that before?‘ This is a very common phrase, both in entrepreneurs and ordinary people. You’re reading Twitter on the subway, and you see that a young man has set up a business that’s blowing up the market: an App to sell food that is going to waste in stores and restaurants for a cheaper price. There has always been this problem, and it is nothing new that people love low prices, not to mention the ethical issue involved. So, the question arises: ‘Why didn’t I think of that?’
Although it may seem that everything has already been invented, the truth is that the great structure of the market continues to hide secret doors that lead to hidden places that are little or not exploited at all. That, precisely, is a niche market. We can define it as a small sector within a market segment that suffers from certain needs that the market has not yet been able to satisfy. Compared to other consumer groups, there is no competition to contend with, so success is more than guaranteed. However, the difficulty lies in choosing a niche market and studying it properly.
Before choosing a market niche: market segmentation
Market, customer or audience segmentation is a technique that divides potential customers into large groupings. In this way, firms can effectively carry out their marketing campaigns, creating personalized messages and content for their segments. This segmentation can be used based on different parameters, which serve as a knife to divide the pie and differentiate each segment.
The segmentation criteria, as we have explained, are the variables used by a company to discriminate its target audience from those who are not of interest to them.
Geographic segmentation criteria
This criterion, as its name indicates, divides the public according to where they live. This is because each country and each specific place has its own characteristics that differentiate it. Thus, its inhabitants have specific needs. In Spain, for example, issues such as climate, type of leisure or culture differentiate us. Thus, the residents of Spain suffer from certain deficiencies or ask for certain requirements that these characteristics of the country have created for them. The result is that what works in Spain may not work in England.
However, isn’t it true that the climate in the south differs from that in the north? Within the same country, culture, climate and customs vary from region to region. This is why there are different subcategories in the geographic segmentation criteria. These are: continent, country, community, city, region, coastal or inland area and urban or rural area.
Demographic segmentation criteria
Demographic targeting criteria are very useful, as they have a strong influence on purchasing behavior. However, they are often not sufficient and must be combined with other segmentation criteria. For example, a top company may study that its target audience is women in their 20s and 30s. However, not all countries carry tops, in some countries the climate makes it impossible and in others it is even forbidden. Therefore, they will have to shrink the circle, leaving a small slice of the big pie.
The most widely used demographic criteria are age and gender. Sportswear, perfume, home decor and publishing companies all draw their target audiences based on age and gender demographics.
Regarding age, this is divided into several groups:
- Seniors: Seniors are senior citizens. They are characterized by having a lot of free time for shopping and by having a generally good purchasing power. They are further divided into early retirees, grandparents and relatives, late retirees and active retirees. The reason for the different separation of grandparents and relatives is that their primary preference is the family, and they invest a large part of their money in it. The sectors targeted by seniors are travel and leisure and health and wellness.
- Baby Boomers: are those born between 1946 and 1964. They account for 70% of the world’s wealth and are very cautious when it comes to shopping, spending time looking for information on products. As for social networks, they are very present on Facebook and WhatsApp.
- Generation X: this is the name given to people born between 65 and 79. They stand out for their stability and are aware of the latest trends. Unlike Baby Boomers, who rely on the traditional and are wary of novelties, Generation X is attracted to everything that is an innovation.
- Millennials: this group includes all those born between 1981 and 1993. They are the first generation to have grown up with the use of technology. They are multi-device, use social networks, and account for more than half of all online shoppers. Their consumption is divided into the travel and leisure, clothing and technology sectors.
- Generation Z: the great digital natives, the kings of the online world. They shop online, but they also like the ritual of the physical store. Before making any purchase, they research and analyze the product. Finally, what they value most is immediacy.
Psychographic segmentation criteria
These are lifestyle, personality, social class, interests, character, attitudes and hobbies. It is one of the most difficult criteria to classify, but also one of the most enlightening. Although it involves more time-consuming in-depth work, the results are very beneficial in guiding the company’s entire activity. Think that the psychographic criteria are the ones that give your buyer persona a name. With the others you only get a sketch, a blurred image from which you can intuit something.
Behavioral segmentation criteria
In terms of commercial strategies, these criteria are very revealing, as they will tell you what consumers want and expect from a product. These include: frequency of purchase or use of the product, expected benefits or uses, brand loyalty, and perceptions and preferences. Although it used to be practically impossible to solve these questions, Big Data helps a great deal.
How to choose a market niche?
As we explained at the beginning, a niche market is a small, hidden part of a market segment. Within the 20- to 30-year-old women we mentioned earlier, there is a part of them who are interested in sustainable fashion because they have environmental concerns. That is a niche market.
If you haven’t found yours yet, here’s how to choose a niche market.
When choosing a niche market, review your capabilities.
When doing anything in life, the main thing is to know how to do it and, above all, that you like it. There are many people who decide to start a business, launching themselves into the void with a business, only because it has a high probability of success. Maybe the technology sector is on the rise and creating a computer programming company is a good idea, but are you passionate about this subject?
You are going to have to work hard day in and day out, and if you don’t like your job, it will weigh heavily on you. In addition, you must be knowledgeable about the area, have worked with it before and be knowledgeable in the field.
In short, you should choose a niche market in which you can easily operate and that fits your interests.
Search for a need
Within this market segment, there are people who have a problem that the rest of the companies have not been able to listen to. You must open your ears and be attentive to any movement. Check forums, read the doubts that consumers have, analyze the keywords of your market, or even think about your own experiences. Perhaps you have ever searched for information on a very specific topic and have not been able to find what you wanted. At the end of the day, it’s all about having an entrepreneurial mind that looks at the world as a great business opportunity.
It doesn’t help if one or two people have that problem. Unfortunately, a business involves a lot of work and money to only be able to solve the need of two people. Before jumping in without a parachute, check if the demand for the product is real and sufficient. To do this, you can also make use of search engine keywords. Through certain tools, such as SEMrush, you can check the search volume of the words that define your niche.
Check out the competition
You have found a topic that you like and that you control, you have identified a gap in the market, and you have found that there are several people who suffer from it. Now, it’s time to check if there is really no one exploiting this problem.
Ideally, there should be no competition. However, in the world in which we live, this is quite complicated. The important thing is that the competition is not too much, but that you can count it on the fingers of one hand. Once you have identified them, think about how you are going to stand out from them: why should consumers choose you?
Why is it beneficial to choose a niche market?
Increase in potential customers
Developing a generalist business that targets the majority of the population can be very tempting. However, since your target audience comprises many groups, you will not be able to specialize and therefore offer a product that many companies have already offered before. With a niche market, the target audience is reduced, but the potential customers increase, since you are providing a specific solution to certain people who have a specific desire.
Increasing the value of your offer
This point is closely related to the previous one. Since your offer involves the resolution of a problem that before your arrival had not been taken into account, your brand is extremely valuable for all those people who suffer from that need.
The only opportunity they have to fill that gap is your company, so they will be willing to pay a high price for your product or service. On the other hand, if there are multiple products similar to yours, it is normal for the user to become more demanding and look for the most competitive price. Thus, the number of sales would be higher in a generalist market, but prices would have to be lower.
Marketing plan easier to create
When it comes to defining the preferences, tastes and desires of your audience, you will have a much easier time. As a result, campaigns will be easier to carry out, will take up less time and will give you better results. Likewise, you will know in which networks you should be present digitally, how to communicate with your audience and what content you should generate. From the creation of new products to the definition of your editorial line, everything will be less complicated and overwhelming.
The innovation and the highlighting of a need that had not been considered will make the spotlight point to your brand. In the absence of competition, you will become the authority in the sector, obtaining a great notoriety.
In short, a niche market is the place from which, unconsciously or consciously, all successful businesses have started. The victory of a brand is always triggered by an imbalance between supply and demand to which it provides a solution. Find the market’s Achilles’ heel and get your head in the game.