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What Is Niche Marketing?

niche marketing

Niche marketing might sound like a buzzword used by marketing professionals. But there are many good reasons to consider this marketing strategy to market your product or service.

Niche market definition

This is a smaller market that fits into a larger market. With this type of marketing, you target a niche audience based on certain features. These can include lifestyle, personal characteristics, income, location, behaviour, age, profession, industry and more. Instead of competing with companies offering their products or services to larger markets, you narrow your focus to an audience with certain characteristics.

Niche market examples

To give you a better understanding of this type of market, let’s consider some examples. While you could open a restaurant that caters to a range of people, a specialised niche would be to open a vegan restaurant. In this case, your target audience is smaller but you will have a clearer focus on attracting your ideal customer.

One example is Divvies Vegan and Nut Free Snacks in the United States. The company specialises in baking snacks that are free of peanuts, tree nuts, eggs, and dairy. While the company could have decided to produce snacks for a mass market, it decided to focus on a small market whose needs were not being met.

On a similar note, there’s an Australian business called Lefty’s which specialises in selling products for left-handed people. Although left-handed people make up around ten per cent of the population, that’s still around 2.5 million people in Australia. Since it can be difficult to find products suited for left-handed people, this business is serving an unmet need in the market.

Tips for finding a niche

If you are considering starting a niche business or implementing a niche marketing strategy in an existing business, here are a few things that can help get ideas:

Consider your interests and strengths

Consider areas of your life or business that you are particularly passionate about. For example, the founders of Divvies had a young son with several severe food allergies. The allergen-free snacks they were able to find were not appealing so they started to bake their own. People loved their treats so they decided to create a business that specialises in creating tasty treats for people with food allergies.

If you find your business does particularly well with a niche product or service, consider developing this niche. For example, a concreting business can offer services to homes, businesses and governments. But if this business finds greater success and less hassle in projects for local governments (such as building footpaths), as compared to residential projects, it might create a niche focusing on these services.

Research potential target markets

You might uncover a niche market that ticks the boxes in point 1. However, before pursuing a market niche, you will want to be sure that it will be large enough to build a customer base. In the Divvies example, the owners would want to make sure that there were enough potential customers to support that type of business. Research has shown that food allergy rates are 1.9% for milk, 1.8% for peanuts, 1.2% for tree nuts and 1.9% for dairy. Although these seem like small amounts, if you add them up, they account for 6.8% of the US population – around 22 million. As a business that sells nationwide through its website, this is a substantial market.

Another way to determine the viability of developing a niche market or niche business is to do some keyword research. Using tools such as Google Keyword Planner and Google Trends. These tools will show you how many people are searching for particular terms over specific timeframes. If search volumes seem very low, there might not be enough demand to justify focusing on that niche. However, for business products and services, the market might be very small and the demand for products is not reflected in online searches.

You could also check social media to gauge the interest in particular niche market products and services.

Create a picture of your ideal customer for niche marketing

Once you are confident that marketing to a niche is viable, determine the characteristics of potential buyers. For example, in the Lefty’s example above, your market will be people who are left-handed who are looking for suitable products. At the same time, be aware that buyers won’t’ always be the product users. Parents with left-handed children would likely make up a substantial portion of the people researching and purchasing these products.

For our concreting company example, the potential buyers in this niche market will be much small. Decision-makers will work in certain departments for local councils.

Develop your niche marketing program based on your research

After you have done your research and believe that you can meet the needs in a niche, it’s time to consider your marketing campaign options, including:

  • Search – SEO and pay-per-click
  • Social media
  • Direct mail
  • Print
  • Radio
  • Television<
  • Telemarketing.

For a large consumer niche, such as allergen-free foods, search and social media marketing would probably be the most effective. For the concrete contractor looking to specialise in local council projects, direct mail and telemarketing would be more appropriate because the number of potential decision-makers is very low.

Pros of niche marketing

Finding a business niche and marketing to it offers several advantages. First, you can narrow your focus and marketing costs to go after a smaller market. If it’s an underserved market, the competition will be lower so there’s a greater chance of succeeding if you get the other factors right.

Cons of niche marketing

Pursuing a niche is the opposite of diversification. If you specialise in one niche market and that market collapses, it could spell disaster for your business. For example, if a company decides to focus on a niche export to a particular country and that country changes its importing rules or raises import tariffs, it would put that business at risk. A sharp change in the exchange rate could also be a potential issue for a company focused on one export market.

Business finance can help you launch niche marketing initiatives. Learn more about unsecured business loans from Moula.

Also, to estimate the Return on Investment from marketing activities, use the Moula’s Return on Investment Calculator.


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