For those unfamiliar with the concept niche market or niche marketing, essentially it is a market segment that is focused based on a target demographic. The more focused your target niche market is, the greater chance you have of your advertising resonating. Although there is no hard science to finding a niche market, it mostly revolves around choosing a product and your target niche market. Doing these two things well, will maximize your advertising dollars and give you a competitive edge.
Choosing a Product
When it comes to choosing a product to sell, there are obviously several factors you will have to consider. Many people will tell you to focus on your passion or stick to something you are familiar with. This works out great for people whose interests align with profitable niches markets, but what about everyone else? Don’t be afraid to brainstorm and get outside of your comfort zone.
Look into products that have several accessories. When selling big ticket items, the chances are high that you won’t get to enjoy a great profit margin. This is where product accessories come in. Often times you can enjoy a markup of 100% or more when it comes to accessories. Since the customer is already purchasing the big ticket item from you, they won’t think twice when it comes to buying the accessories along with them. A perfect example is buying a TV to resell for $220 and buying an accessory like an HDMI cord for $2. The TV normally retails for $250 and the HDMI cord retails for $18. As you can see choosing a product with lots of accessories can significantly increase your profit margins.
Another useful tip for choosing a niche product is to focus on items that are related to hobbies or passions. Currently some popular categories for hobbies and passions include, vaping and drones. Customers who are deeply passionate about their hobby will spend hundreds on items and accessories and continuously invest in further improvements. The same thing applies to a product that solves a customer’s problem. People will beat a path to your store, if you can help them get rid of an annoyance. An example of this type of product is a simple rat trap. You can easily capitalize on eager buyers by offering a product-based solution to their problems.
Price range is also an important factor to consider when choosing a niche product. You want to find that sweet spot where you can make a decent profit from each sale, but not so big that the customer has to do extensive research or require personal attention before making a purchase. Based on my personal experiences, I think the sweet spot is between $100 – $300. This is a price range where a customer will feel comfortable with purchasing a product based on the information you have provided on your website. Any more than $300 and the likelihood of a customer needing to research, shop around or speak directly to a customer service or sales rep increases.
The next thing you should consider when choosing a niche product, is local availability. Try to avoid products that someone could easily pick up at a local Walmart or Target. For example, the average person in need of some paint would just run to the local hardware store. As with all things, you have to walk a thin line when making your selection. You want to find a product that is difficult to find locally, but not something so rarely purchased that there will be no demand for it.
Product turnover is next on my list of factors to consider. You have to choose a product that has low turnover. What you want to avoid is something that has a new model every year. Smartphones are a perfect example of this. The last thing you want to do is to stock up on iPhones when you the latest model is going to be released within six months to a year. There are also other factors such as pricing and profit margins that make smartphones a bad choice.
Since most businesses are small and need every competitive advantage they can get, having a low turnover product is the smarter move because you can receive a higher return on your investment in your website. In order to compete you will have to build an information-rich website that can bring in natural search results along with your paid web traffic. Would you rather invest money in building a site for a product that will be obsolete within a year or two? Or, would you rather invest in something that would be obsolete in five years?
The last thing I think you should consider when choosing a niche product is whether or not the product is disposable or consumable. If it is a product that has to be re-ordered on a regular basis you have a greater chance of gaining a repeat customer. Repeat business and word of mouth is essential. If you are able to make the customer happy with your service, you will gain their trust and they will likely buy from you again.
The factors I have discussed are to be used as a guide and not as a checklist. A product doesn’t have to meet all of these requirements to make your business successful. In fact, it is probably unlikely that you will find a product that meets all of them. Just keep this guideline in the back of your mind when you are trying to find your niche product and you will be ahead of the game.
Choose Your Target Niche Market
Now that you have an idea of how to choose a niche product, let’s assume that you have found the product you wish to sell. The next step in properly carving out your place among competitors is to choose your target market. Given the economic circumstances of small businesses, you are not able to target everyone. That just doesn’t make sense financially. If you want to be efficient with your marketing dollars, you will have to choose what audience you will target.
This is where researching your competition will really pay off. You can sell the same product as your competition, but your business may target a different segment of the market than your competitor. For example, you and your competitor may sell decorative lighting fixtures, but your competitor may choose to focus their advertising dollars on first time homeowners and you may choose to target interior designers or home remodelers. The segment of the market that you choose to target can be very niche, you can be as specific or as broad as you want to be as long as it appropriate. Once you have defined your target niche market, you will know more clearly how to market your business and where to market your business. Also, having a target market will help make it easier to expand your product offering. Now that you know who you are targeting, you can consider what other products they may be interested in and add those products to your inventory.
Understanding how to choose a niche product and a target niche market will be the first few steps you will take towards really carving out a niche market for your business. It is a competitive world and any edge you can obtain could mean the difference between a business that fails and one that thrives.