The difference between success and failure begins with choosing the right niche for your business. There are many decisions that are made in business, this is vital. It is like choosing where you build your house.
Few business decisions have such a direct and vital impact on business life as this. The same will happen when you want to develop new products.
Choosing the market niche is choosing the customer profile that you want to serve with your product and service. We will give you some guides to help you make this decision that will mark the entire life of your company.
Have you ever wondered why some people fail dramatically in the same businesses where others are spectacularly successful and create true empires? Choosing the right niche is one of the answers.
What is a niche market?
The term "Market Niche" is used in marketing.
Refers to a well-defined portion of a larger market segment. Within the market niche, people have similar characteristics and needs. The entrepreneur chooses a market niche and looks in it for the needs that are not being met, or that those who are trying to do it do so poorly.
Entrepreneurs and marketers speak of "niche markets" when they think of:
- open a new business,
- develop a new product,
- launch an advertising campaign,
- look for unmet need opportunities,
- do market research,
- test products or services, etc.
Niche markets have several characteristics that allow you to distinguish and classify them. A market niche is:
- A well defined portion of a market segment.
- It is a small group of people, organizations or companies.
- Your particular needs are similar, at least in some respects.
- Those who form the market niche are willing to cover those needs.
- They have the economic capacity to pay and thus satisfy their need.
- To meet these needs, a company with the capacity and specialization to organize its operations is required.
- There are few or no companies at the moment adequately satisfying that need.
- The size of the market niche is large enough to generate an attractive sales and profit volume for the company that serves it.
Where are the profits of a company?
The profits of a company are in the market niches.
Companies that want to make attractive profits for their businesses must specialize their operations in niche markets, even better in a single market niche of sufficient size.
When you think of a business idea, which in itself is the worst argument for starting a new business, first search and think about what your niche will be.
When you find it, research and analyze its needs, then develop a business that satisfies that need better than any other.
It is impossible to serve all markets.
- A market niche can be a well-defined place or territory that could be described by precise location within a sector of your city. For example: "The inhabitants of zone 14 in block 24 of the west of your capital."
- It could also be identified as a group of people from a profession. For example: "Agricultural engineers under the age of 40".
Never go out and build a new company if you have not clearly defined your niche before. This is more important than many beginners can imagine.
Get vaccinated against the competition…
The competition in the market segments is very great, in the market niches the competition is much more selective.
Specialization drives competition away.
A specialized and focused company may be able to create barriers that prevent others from wanting to enter your same niche.
An example:
You locate a sector of your city with sufficient population density and open a supermarket with the appropriate size to meet the needs of that market niche. It can be six blocks around.
It can be a group of condominiums located in that sector. If you do it right, if your customers are satisfied and you have managed to develop their loyalty, it is almost impossible for a competitor to want to enter the same sector. The competition knows that he would have to invest a lot of money to occupy a place there and that in the end the volume of sales he can rescue will not be attractive to him.
5 Tips for choosing a profitable niche
1. Determine what your skills are, your abilities.
First determine what the strengths, capacities, talents and resources are.
If you are an entrepreneur, this applies to you as a person.
If you have a business, do the analysis for the company as an entity that already has a life of its own and that is offering products and services.
2. Decide how you will specialize:
to. Resolve if you are going to do it geographically: a region, a country, a city, a sector of a city, etc. You may want to specialize in people: men, women, children, youth, university students, professionals, workers, etc.
b. You may want to specialize by customer size: large companies, small companies, wealthy families, middle-class families, etc.
c. You may want to specialize by type of products: cleaning products, food, medications, technological products, health care products, etc.
d. You may want to specialize in quality and price: consumer products with short shelf lives and low prices; or select products of the highest quality and very expensive; or products that are sold in large volumes against products with a very high marginal profit, but whose sale is in low volumes. Think of the auto industry, there are quite a few examples there.
and. You may want to specialize in service, you will look for products that are positioned not by price or quantity, but by the service that accompanies them: for example, closed circuit surveillance services.
F. It may be that you decide on the channel that you will use. For example, you can choose businesses whose product is sold in their own premises and the customer comes to buy them, or products that are sold door-to-door such as direct sales businesses, or they can be products that are only available online or through of referrals.
3. Measure the potential of the chosen market niche.
Research, analyze and choose at least three niche markets with apparent appeal.
You must ask yourself these questions, for each of the chosen niches and try not to make their assumptions, but rather the data you write down to be supported by a deep analysis and conscientious investigation.
to. Do members of that niche have a real desire or need to buy that product or service ? Does the need really exist or do you have to invest in creating it?
b. How neglected is that niche really?
c. How many companies or people are serving you right now or are they trying to do it?
d. What is the size of that market? Is that size enough for another company and to generate enough sales to generate the profits that the investment in the business will require?
and. What is the level of risk or volatility that this market has?
F. How easy or expensive is it to enter that market?
g. What do you think will be the immediate or medium-term reaction that the competition will take when your company enters that market niche?
h. What is the purchasing power of the members of that market?
i. Is it a new or newly established market? For example, if your choice was geographic, investigate how long that group of people exists, there is frequent rotation in the inhabitants or rather they are families that have lived in the same area for many years, are older people or are young people. Analyze what the residents of that sector do.
j. What are the habits and customs of the members of that market, their values, their preferences, their culture and religion? All of this data is valuable.
4. Decide if you are capable of serving the chosen market niche.
Once you choose the market niche, analyze if you are able to serve it:
to. Is it an easy niche to reach and serve, due to its location or other peculiarities?
b. Do you know what the costs of serving this niche will be and if the potential sales are attractive to make that investment and generate profits?
c. Should you establish additional investments to those you already have to enter that niche market? Should you develop new market channels to reach them?
d. Will your operating costs in that niche be less than or equal to the competition?
and. Will this new market niche affect the operations your business already has or what it is currently doing?
F. Will you be able to better serve the needs of your niche, than the competition?
5. Analyze the future of that market niche.
to. How stable over time is the niche you have chosen? Is it a mature or very young market?
b. Will your company be flexible enough to adapt to eventual changes in its market niche?
c. How much can it cost you to refocus or redesign your products or services when circumstances warrant?
d. What is the probability that your niche will be depleted, stagnant or extinguished?
6. Are you going to feel comfortable serving this market niche?
This is a fairly subjective point; but it also has relevance and impact on the success of your business and on your personal satisfaction.
Nothing better than dedicating ourselves to what we like. What we like has to do with the people we serve and the products we offer them.
So give this last tip a head, too.
And remember… Change everything!
Apply these six tips. You will be making one of the most important decisions in your business career.
You will also acquire a skill that will be useful to you forever in your business, whenever you want:
- Enter new markets.
- Develop new products.
- Buy other ongoing businesses.
- Make more investments in your business.
- Increase your profits, when sales do not increase.
Choosing the right niche is the difference between success and failure. You will see!
If with this article, we have made you think that the decision to start cannot be born from a simple brilliant idea or a hunch, we have already achieved enough.
Everything changes, says the song. Niche markets can also change, evolve, or disappear. You must have sufficient flexibility to detect these changes and to adapt your business.
Feel free to leave your comments below. Be confident to ask, add your ideas and suggestions. Tell your own story regarding what we mentioned in this article. Suggest other topics that interest you too.
