"Never settle for less than your dreams.
Somewhere, sometime, someday, somehow, you'll find them

- Danielle Steel, Bittersweet.

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Tuesday, September 9, 2014

Understanding Niche Markets

What is a niche and what makes a niche market?
Upon realizing this particular market, what should an entrepreneur do?

Well, a niche is defined as a specialized part of a market for products or services. It creates a situation where a business's products or services can succeed by being sold to a particular kind or group of people.

A niche market, according to Wikipedia, is the subset of the market on which a specific product is focused. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact. It is also a small market segment.

Which makes one ask, why focus on a small part of the market when logic dictates that you widen your market as much as possible?
The simple answer is that customer needs are unique and thanks to competition, it is impossible to offer the best possible products and services to everyone at all times. In other words, it's impossible to be all things to all people.

Niches in essence exist to address the classic problem of jack-of-all-trades who are a master of none.
Focusing a particular product or service on a well-defined target market. Working within a niche also enables you to become really good at something, and this partly informs the Google philosophy:
It's best to do one thing really, really well.

How does one identify the target market?

As outlined above, a key component of operating in a niche market is being exceedingly good at one thing. From experience, many will agree that becoming known for one thing is not hard… It is saying NO to all of the other distractions that is the hard part.

For this reason, a niche should be very well defined right from the start.

The Customer
It all starts with defining your ideal customer. This involves the interests, issues, aspirations and needs of this customer. In addition, the gender, age, geographical location, hobbies, position in society, revenue and other market relevant information.

The Product (Good or Service)
Next, what is it that you purpose to sell? This forms the industry you'd like to serve.
This should be something you love, are quite good at and have an influence in.

The Brand
It is at this stage that you set yourself apart from the competition (oh yes, there's always someone else addressing the same needs, or soon will). Differentiating your brand through offering an experience that puts the customer first can ideally make you the go-to person in your chosen niche.

Fill a Gap
In some cases, your business idea will enable you meet an ignored need by addressing a forgotten audience. The good thing about this is that it offers a first mover advantage that accompanies blue ocean marker strategies. In such an uncontested market space, competition can ideally be made irrelevant if and when they get into the market.
To best do this, understand your market's unique needs and meet them appropriately.

Your Best Shot
In Jim Collins's Good to Great, the Hedgehog Concept encompasses a deep understanding of:
  • what you are deeply passionate about
  • what you can be the best in the world at
  • what drives your economic engine
Knowing what you are really good at will reveal your priorities and business focus. This knowledge can also be realized from past failures and patterns.

Be in the Know
It is one thing to be good in business offering great products and services but another to remain consistently great. To avoid being overtaken by events, it helps to understand industry trends

Your Niche Statement
This statement coalesces what your niche is, their problem, your solution and your promise.
Having done all the above, it is now possible to integrate your ideas. At this stage, you are able to start to shape your product, your passions, and your customers’ needs to create something new and different.

The Way Ahead

In sum, a deep understanding of your niche market enables maximizing of your marketing effort on a carefully selected market segment. It is also cost-effective and easy to monitor and scale.

Niche markets present a low-risk way to grow a business. Success greatly depends on meeting the unique needs of your target market, saying the right thing to them and always testing the markets.