Niche Marketing

The Case For Niche Marketing

Niche Marketing can be applied to Internet based businesses with great success.  A business that implements Niche Marketing will not need a large advertising budget because customers will be looking for its products and services.  It will not need the flashiest or most technically advanced Web site in its industry because it will serve a targeted loyal customer base.  It will have a high percentage of sales per visitor because customers will be ready to purchase as soon as they find the site and price won’t be the main issue for them.  Niche Marketing can be a total business philosophy.

The Internet is a great equalizer…almost.  If you sell books, how do you compete against Amazon?   If you sell jewelry, how can you compete against Blue Nile?  These established Internet businesses have huge advantages with unlimited budgets, great brand awareness, and consumer trust. How can a small business overcome this? The answer is Niche Marketing.

Large online stores sell tens-of-thousands of products from tens-of-thousands of web pages.  If you searched ‘books’ in Google on the date this article was written, the top commercial listing is Barns & Noble, followed by two listings for Amazon.  The next two are for Powell’s Books and AbeBooks.  Good job guys, but brand awareness and low pricing wins out.  Amazon gets the click.  How can you overcome this? Niche Marketing.

Google reports that it has 197,000,000 pages indexed for ‘books’, and 294,000,000 pages indexed for ‘book store’.  Where will your bookstore end up in that mix?  If it is not in the top 30 results, it doesn’t really matter because nobody will ever see it.  On the Internet, competition is fierce and the answer is Niche Marketing.

What Are Others Saying?

Wikipedia makes this statement about Niche Marketing:

“By seeking out smaller segments of larger markets, a website can be developed and promoted quickly to uniquely serve a targeted and usually loyal customer base, giving the affiliate a small but regular income stream.”₁

About.com says this about Niche Marketing:

“Why should you bother to establish a niche market? Because of the great advantage of being alone there; other small businesses may not be aware of your particular niche market, and large businesses won’t want to bother with it.”₂

Business Dictionary defines Niche Marketing as:

“Concentrating all marketing efforts on a small but specific and well defined segment of the population. Niches do not ‘exist’ but are ‘created’ by identifying needs, wants, and requirements that are being addressed poorly or not at all by other firms, and developing and delivering goods or services to satisfy them. As a strategy, niche marketing is aimed at being a big fish in a small pond instead of being a small fish in a big pond.”₃

Consumers and Markets

The Internet is a Global community.  You can run your business from a spare room or a garage and sell products or services anywhere in the world.  Your online business can reach billions of potential customers.  In contrast, what about a bricks and mortar business?  Let me use the city I live in, Ft. Myers, Florida, for an example.  In 2008, Ft. Myers had an estimated population of 623,725₄.  That means that a local business in Ft. Myers has 623,725 potential customers, but do they really?

People shop in a fairly small area located around where they live and work.  If you’re not in their small shopping neighborhood, chances are your business won’t reach them (they won’t become your customer) unless you’re the only place in town that offers what they’re looking for.  Out of that 623,727 population, you may have only 10% or 62,372 located in your shopping neighborhood.  A local business must offer a wide range of products or services in order to reach customers from this small customer base.

The advantage that a bricks and mortar business has in this example is competition.  A small business may only have one or two fierce competitors located in its shopping neighborhood.  For a local business, service then becomes the name of the game.  Offer better service than your competitor and customers will keep coming back…but I digress.

These two factors: competition and reach, affect all businesses.  An online business has a very great reach (national or maybe even global), but fierce competition.  A local business has a fairly small reach (our shopping neighborhood), but relatively few competitors.  Our goal with Niche Marketing is to capitalize on global reach while minimizing competition.

So what is a Niche Market?

A Niche Market is a subset of a market, or as it is sometimes called, a market segment.  Market segments are groups of consumers who share similar interests and needs.  These consumers look for specific products and services that fulfill their interests and needs.  Now, let’s go back to our bookstore example.  A consumer shopping for a book is a member of a market segment. Members of this market segment could be students, children, people who like to read, people looking for information, book collectors, etc.  Each of these market segments can be divided into smaller market segment.  Consumers looking for a textbook, a book about animals, a mystery book, a book on the Civil War, or a rare 1^st edition are single examples of narrower market segments of each of the above examples.

The trick in Niche Marketing is to find a market segment that other small businesses are not aware of and large businesses don’t seem to want to bother with.  Many opponents of Niche Marketing feel that if a business is focused on a small market segment it will eventually run out of customers.  This may be true for a bricks and mortar business on a local level, but is hardly a concern for an Internet business with a global market.  In fact, it will have tremendous advantages.

Advantages of Niche Marketing

1.  Smaller Business Scope.  By focusing on a narrow market segment, your business will operate more efficiently.  A Web site focused on its niche will be compact.  The information will be more in-depth, often more accurate, and easier to find.  Because of this, your Web site will have a greater chance of becoming an authority in its market segment (which is extremely powerful).

2.  Greater Selection.  Although your business will offer fewer products or services, its selection of products and services within its niche will be more complete.

3.  Less Competition.  By focusing on a niche that other businesses are ignoring or are unaware of, your business will serve a market with few competitors.

4.  Smaller Advertising Budget.  By serving a small market segment, a niche Web site will have more of its pages ranked higher in search engines such as Google, Yahoo, and MSN for it important keywords and will spend less on advertising.  The best marketing an Internet business can have is good search engine placement.

5.  High Conversion Ration.  Your Internet business will have a higher percentage of sales per visitor because of the variety of products and services available to them within their market segment.  Consumers will not find a better selection of the products and services they are looking for anywhere else.  In essence, they will come to your Web site knowing what they want, and ate ready to buy.

6.  Price Won’t Be The Main Issue.  Because of your business’s authority in its niche and its complete selection of products and services, your customers will be more loyal.  They will be confident that they are making good purchases.  They will feel no need to shop around because of the fear that they might be missing something.

7.  Higher Return on Investment.  With a smaller scope, less competition, a smaller advertising budget, a higher conversion ratio, and a customer’s decision to purchase not based mainly on price, your business will be more profitable.

How do you find a Niche Market?

If you’ve read this far, chances are that you already have a business and are looking for a marketing strategy, or have an idea that you’d like to turn into a business.  In either case, the key to finding your niche is information.  You need to learn everything you can about your products and services and the people who are looking for them.

You can begin by performing a keyword analysis on your products and your market segment.  A keyword analysis will show you how many searches there are for your products and services, and how many competing Websites there are that offer them also.  If you have an existing business, a keyword analysis will show you which of your products can be successfully marketed to a Niche Market and what these markets may be.  If you have an idea for a business, a keyword analysis will help you to find your most promising niche markets so you can focus your entire Web site on them and maximize efforts.

For a detailed tutorial on how to perform a keyword analysis, see my other article titled Choosing Keywords for Your Product Pages.

Make Niche Marketing Work for Your Business

Once you’ve identified a niche market, what next?  Focus every effort on it.  Develop your Web site around it.  Learn all you can about it and the products and services consumed by it members.  Become an authority on it and share your knowledge.  And most importantly, find products to fulfill it.

Refrences:

1.  http://en.wikipedia.org/wiki/Niche_(industry)

2.  http://sbinfocanada.about.com/cs/marketing/g/nichemarket.htm

3.  http://www.businessdictionary.com/definition/niche-marketing.html

http://en.wikipedia.org/wiki/Fort_Myers,_Florida

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