Know thy audience. This is the golden rule of online business. It’s surprisingly common for people to spend a ridiculous amount of time and money meticulously designing their offer without ever defining their target customers. By doing this, would-be Internet entrepreneurs put themselves into a position of risk in the hope that an undefined group of people will like their products enough to bail them out. More often than not, their offer isn’t received as well as they had hoped, and they find themselves with 10, 000 units of magic lotion in their garage and spare bedroom.
As an online business owner, your income isn’t linked to your effort. Rather, it’s linked to the amount of value that you add to the market. The perception of value is subjective, so it’s vital that you start by identifying your target customers. You can then design your offers with their preferences, fears, and desires in mind. This group of target customers, known as a niche market, forms the foundation of an strong online business.
Fortunately, with the right approach, you should be able to identify the right kind of niche market in less than an hour. In this post, I’m going to cover the what, why, and how of niche marketing:
- What is a niche market?
- Why should I target a niche market?
- How do I identify a profitable niche market?
Take action by reading this post and implementing the action steps exactly as prescribed. If you do this, within an hour you’ll have a profitable niche market option ready for your next big idea.
Creating demand is hard. Filling demand is much easier. Don’t create a product, then seek someone to sell it to. Define your customers, then find or develop a product for them.Tim Ferriss, The Four-Hour Workweek
Question #1. What Is a Niche Market?
A niche market is a small, specific, passionate, and targetable portion of a broader market. In it’s simplest form, a niche market is a group of people who share a common interest or passion. It is common for people to confuse their niche market with their product range. For example, my followers often tell me that they plan to target the exercise equipment or golf accessories niche. Both exercise equipment and golf accessories are examples of product ranges. Fitness enthusiasts and golf fanatics are examples of correlating niche markets.
A niche market is made up of people, not products. At this stage, you simply need to identify a group of passionate individuals to whom you can present your offers. Once you know the group that you are targeting, you’ll be better equipped to design products that meet their needs.
Question #2. Why Should I Target a Niche Market?
There are dozens of compelling reasons that you should target a niche market. In the interest of brevity, I have included what I consider to be the most important ones below.
1. Low Competition
Unless you have an unlimited budget, you probably don’t want to compete with Amazon. Targeting a niche market often allows you to establish your business in an environment with few major competitors. It is far more profitable to be a big fish in a small pond than it is to be a small fish in a big and undefined pond.
2. Upsell Opportunities
A good online business will generate more revenue from upsell offers than it does through the initial sale. For example, if someone were to buy a bracelet from our biker jewellery store, we could offer them biker earrings, necklaces, or even information. Their purchase tells us something about their passion, which makes it easy to identify attractive upsell opportunities.
3. Targetable Customers
Social media allows marketers to advertise to customers based on their profile information and activity. If you’re selling astronomy products, for example, you could advertise to people who like astronomy brands, belong to astronomy communities, or use astronomy apps. If you’re selling spare car tires, on the other hand, who do you target with your marketing?
4. Low Marketing Costs
When you target the general population or a very broad niche market, rather than a specific niche market, you have no option but to advertise to the masses. Ultimately, the result is that you spend a fortune marketing to people who aren’t interested in your offers. When you sell to a niche market, on the other hand, you only pay to advertise to a highly targeted group of potential buyers.
5. Passionate Buyers
People spend money in the direction of their passion. Joe Blogs will grudgingly buy spare tires out of necessity, but he will happily spend everything that he has to feed his remote controlled airplane addiction. If you can find an effective way to feed your customer’s passion, you’ll make a fortune, even in the smallest niche market.
Question #3. How Do I Identify a Profitable Niche Market?
“Okay, okay. I know what a niche market is and why they’re so important, but how do I choose one?” I’m glad you asked. Below is the three-step formula that I apply every time I start a new niche business. Using this approach, it normally takes me less than an hour to identify an exciting market with loads of potential.
This information will only be beneficial if you apply it. I highly recommend that you follow along and complete each of the steps as you go.
Step #1. Create a Buyer Persona
Few people are truly unique. If one person is passionate about something, the chances are high that hundreds of thousands, if not millions of others are just as passionate about the same thing. Rather than scouring the net for interest groups and subcultures, base you niche market selections on real individuals. If you can design an offer that is irresistible to the individual, it will be just as appealing to the market as a whole.
The first step is to choose four close friends or family members and create a simple profile for each of them. I refer to these profiles as “buyer personas” as they are, in essence, a personification of the market as a whole. In an ideal world, you would belong to your chosen niche market. As such, I recommend basing the first buyer persona on yourself.
The profile should include the following information:
- Top 2 – 3 passions
Below is an example of a complete buyer persona:
- Name: Anonymous
- Age: 35
- Gender: Male
- Income: +- $72 000
- Education: Degree
- Passions: Running, Climbing, Camping
Each passion that you uncover through this exercise represents a potential niche market. The additional information that you include in the profile gives you a simplistic buyer profile. This profile will be valuable when it comes time to design your offer.
Result: Completing this step should leave you with four buyer personas and eight or more niche market ideas.
Step #2. Interview Your Buyer Persona
Not all niche market’s are created equal. Now that you have identified several options, you need to whittle them down to just four. One drawn from each buyer persona. To achieve this, contact the people behind the personas and ask them three simple questions:
- What are the two to three things that you are most passionate about?
- Roughly how much do you spend on these passions per year?
- Where do you shop when investing in this passion?
The goal is first and foremost to confirm that your assumptions regarding their passions are correct. Next, you want to find out if their passion extends to their wallet. Finally, you want to know where to go to gain additional insight into the market, find product ideas, etc.
Use the answers to these questions to select one promising niche market option per buyer persona.
Result: Completing this step should leave you with four reasonable niche market ideas.
Step #3. Assess Your Niche Options
Three primary attributes characterise the perfect niche market: passion, size, and money. Your next task is to conduct a bit of research into the niche to ascertain whether these three attributes are present within your top four contenders. You don’t need to get carried away just yet. A simple “sanity check” is all that’s required.
Passion is the driving force behind any niche online business. The more passionate the customer, the easier it is to make the sale, it’s that simple. Passion also radically decreases price sensitivity which opens the door to high value upsell products down the line.
Tip: People share their passions with friends and family. Identify several Facebook pages related to your niche and visit the profiles of 40 to 50 of their fans. If they are posting related content, it’s a good indication that they are passionate.
Size isn’t everything, but the market needs to exist. The more specific the passion, the easier it is to create desirable offers. That said, if you base your niche on a crazy aunt who’s passionate about speckled Australasian mountain ferret breeding, you may end up targeting a niche of one.
Tip: Identify several Facebook pages related to your niche and note the total number of fans that each page has. If the collective total is greater than 500 000, the niche market should be big enough to sustain your business.
Money is important if you want to make any. Your niche doesn’t have to be rich but is mustn’t be broke, either. Remember, a passionate niche will be price insensitive, but if you target the dumpster diving community, you’ll probably have a hard time.
Using common sense, compare your four niche market options on the basis of passion, size, money, and personal interest. List them in order of quality, from strongest to weakest. The first option on your list is your new niche market. Just like that, you’ve taken a giant step towards obtaining the full-time traveler lifestyle.
Next in this series, I’ll take you through the first step of creating a high-selling product: identify your customer’s deepest fears and desires. To access this training, and a whole lot more, be sure to subscribe to my Get Started series.