Simply put, a business niche is a small segment of the market, and it is the basic parameter according to which you develop your product. Niche determines a plethora of important factors that should be taken into consideration when developing a product. By finding the best business niche, you’ll be able to determine the demographics of potential buyers, specific market needs, and price range.
Finding your niche in business is an arduous and complex endeavour.
First of all, should you first make a brief outline of your product, or evaluate the specific needs of the market and the profitability of various business niches? Developing a product is, on the one hand, a direct manifestation of someone’s creativity, and sudden bursts of creativity rarely have anything to do with such tedious factors as demographics, price range, etc. In this case, you don’t choose your niche, your product does it for you.
These two are very straightforward and the simplest ways to choose your niche:
1. Product design at the core: first develop a product and then adapt it to the demands of the market
Practically all revolutionary inventions followed this pathway- Tesla, for instance, didn’t really seek how to sell his product. He simply expressed creativity in a never-seen way and happened to discover alternate current in the process of doing so. Great painters like Van Gogh didn’t care about the demands of market and clients who would potentially purchase his “products”.
This path is for passionate revolutionaries, for those who seek to change the world. Their creativity cannot be constricted within the borders of one business market.
However, not everybody has revolutionary ideas, nor does everybody want to. This is why it’s important to consider the next way to find your business niche.
2. Find a gap in the market and then tailor a product to the demands of the audience
This is the exact inverse of the first path. This is also the typical way businesspeople solve problems. They would first analyze the market, relevant industries, and services, and then see where they can make a profitable breakthrough.
It’s obvious that this is the path most people would choose, as it is much more likely to result in profit and success. Good analysis skills are absolutely necessary:
- Analysis of competition
- Getting various consulting services
- Demographics analysis
- Market needs analysis
A good entrepreneur is able to notice an “empty spot” in the market and take this spot. For instance, some businesses offer various transportation services. They transport everything from toothpicks to furniture. In other words, their business niche isn’t specific at all. On the other hand, some businesses focus specifically on transporting pianos. These instruments tend to be very pricey, and owners are often emotionally attached to them. Moreover, pianos are kind of cumbersome, which necessitates special transportation skills. As a result, businesses that focus solely on transporting pianos have done a good job of finding a highly specific business niche. Furthermore, they are much more likely to deliver high-quality service, thanks to their choice of a business niche.
You can combine these two approaches by adapting your initial idea to the market’s demands. For instance, you may want to develop a fitness app, but in the process of doing so, you realize that the market is oversaturated. This is why you try to be as specific as possible- for example, you might decide to develop a fitness app that specifically targets the older population.
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To choose a niche, you will first have to answer the following questions: “What kind of service do you offer? What are the needs your product satisfies?”.
This is sometimes easier said than done. Let’s reexamine the fitness app example. If you want to develop a general fitness app, this app will, broadly speaking, satisfy people’s needs for a healthy lifestyle. Moreover, to satisfy these needs, your fitness app may offer services like scheduling exercises, virtual trainers, reminders, exercise trackers, data analysis, etc.
Then, you will want to analyze your biggest competitors. Chances are that you will find out that other fitness apps offer exactly the same type of services. It will also immediately become evident that there are thousands of these fitness apps, and that you will need to invest a lot of money in the marketing of your new product.
After analyzing all this, you will have to admit that you will practically add nothing new to the market.
This is when the real quest for the best business niche starts. Instead of making a general fitness app, it will be much more useful to focus on a group of people who care about a healthy lifestyle the most- older people. Needless to say, this statement must be corroborated with empiric evidence- public opinion polls or something like that.
Thus, the needs your product satisfies become much more specific- while the basic goal of your fitness app is still linked with healthy lifestyle, now you decided to adapt your product to the specific needs of older people: reduced mobility and increased chances for injury; presence of chronic illnesses which might be linked with exercise contraindications; various cognitive and sensorial deteriorations like, for instance, Alzheimer’s, Parkinson’s, and other types of dementia. Older people are much more likely to suffer from some of these health complications, and your fitness app has to be tailored according to these specifications.
Let’s summarize the important things from this section. These are the things you want to keep in mind when discovering your niche:
- Think about these questions: “What type of need will my product satisfy?” and “What services do I offer and do they correspond to the needs I want to satisfy?”. Identifying chief competitors- there are several benefits of a careful analysis of your competition. First, you will see how other people solved the same problem. Second, you will be able to assess the novelty of your approach.
- Finding the specific needs you will satisfy which is concurrent with finding your target demographic group. The most important thing here is to find evidence that links a particular need with a specific demographic group. We have mentioned that you can conduct surveys of public opinion, but there are other available methods.
How To Test Your Niche?
We’ve already mentioned one approach to testing your business niche- conducting a simple survey aimed at your potential buyers. This can be a set of simple questions revolving around the needs of your potential customers and their impression of your product. Participants in your survey must be allowed to express themselves in their own words- normally this would be the final question of your poll saying something like: “Do you have something to add?”. Then you can do a thematic analysis of answers and see how you can improve your product so it meets your customers’ needs.
Nowadays, conducting a small poll is extremely easy, as you can find participants online.
Another useful technique to test your business niche is a presell campaign on e-mail and social media. For starters, simply find your friends and acquaintances who fall your target group category, and do a small presell campaign. To do this, you should at least have a test version of your product so people can see what it’s all about.
If we stick with the fitness app for old people we’ve talked about earlier, this would mean that you developed a raw version of the app or at least made a Mockup. Then you find people, send them e-mails, describe the product and have them try your app. The best thing is, you can combine the aforementioned survey approach with this one- after people try your app, ask them a few questions about the product and their experience.
Launching a crowdfunding campaign is another way to test your business niche, albeit a more demanding one when compared with the other two approaches we’ve mentioned. You’d need a more or less developed prototype in order to convince people to crowdfund you. There are many crowdfunding campaign sites like Kickstarter or Indigogo. When you have the prototype ready, just send your business application and see how crowdfunders react.
How To Evaluate A Profitability Of A Business Niche?
These are the major things to keep in mind when discovering your niche:
- The number of potential buyers
- Wealth or income of potential buyers
- The refractory period of the need you want to satisfy with your product
Essentially, choosing a business is in itself a certain narrowing down of the group of your potential customers. Thus, this is a kind of trade-off process, there’s a special relationship between the specificity of the chosen business niche and profitability. In most cases, you don’t want to take a too narrow approach as this would mean that there are practically no people who would buy your product, while, on the other hand, a too wide approach won’t help you stand out competition-wise.
There are exceptions, of course. Some merchandisers focus solely on extremely wealthy customers. In other words, while their target customer group is rather small, its relative wealth compensates for this.
What is a refractory period of a need? This is the period between the two apparitions of the need. Hunger, for instance, has a very short refractory period as you will be hungry in a matter of hours. On the other hand, the “need for vacation” has a much longer refractory period- most people go on vacation once or twice per year. The rule of thumb is, the longer the refractory period the larger the customer group should be.
In Which Cases It Is Better Not To Go For Your Chosen Niche And Take Another Direction?
If you follow the guidelines mentioned in this article, and apply your common sense to what you do, you probably won’t need to change your business niche, but mistakes are always possible.
Perhaps the biggest risk factor you have to consider is technology. It develops so fast and revolutionizes our lives while we’re hardly even aware of it. You may find a good business niche, but your entrepreneurial endeavours will be over if technological development completely changes the way people satisfy their needs.
Video clubs were once quite popular. However, once the Internet overtook the world, nobody seemed to care about video clubs. Internal combustion engines are still by far the most popular engines in the world, but it may not be smart to invest in this type of technology, as electric motors and other inventions are likely to replace them in the near future.
Current tough competition conditions also dictate that an entrepreneur should pursue ‘unfair competitive advantages’, which are legal but ultimately very strong competitive advantages that are hard to imitate. Startups are more likely to succeed if they are striving to be the ‘only’ company in the sector, not just like everybody else but slightly different. It is very difficult to achieve, but these are the factors that will make companies go further and further. Dream big and go big, yet don’t forget about testing your ideas with a very small budget. These little bets will help.