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:

  1. What is a niche market?
  2. Why should I target a niche market?
  3. 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:

  1. Name
  2. Age
  3. Gender
  4. Income
  5. Education
  6. Top 2 – 3 passions

Below is an example of a complete buyer persona:

  1. Name: Anonymous
  2. Age: 35
  3. Gender: Male
  4. Income: +- $72 000
  5. Education: Degree
  6. 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:

  1. What are the two to three things that you are most passionate about?
  2. Roughly how much do you spend on these passions per year?
  3. 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.

Up Next…

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.

About The Author

My name is Dejan and I love adventure. I love it so much, in fact, that I spend the most of every year traveling the world and crossing items off of my bucket list. The rest of my time is spent teaching others to do the same. Click here to find out how.

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8 Responses

  1. Zakiya

    Hi Dejan

    My question is on the Tripwire product. From how I am reading it, it sounds like you only advertised the tripwire product but is that correct? Did you have more products advertised for possible upselling or was the taillight the only thing?

    • Dejan

      Hi, Zakiya.

      I advertised my products in sequence: Tripwire > Core > Continuity. Once my customers purchased the tripwire, I used email marketing and Facebook Ads to upsell them on more expensive products.

      1. Tripwire – Between $15 and $30
      2. Core Offer – Between $100 and $300
      3. Continuity Offer – Between $10 and $100 per month

  2. Arno

    Hi Dejan

    Just discovered your website today, and even just reading your posts makes me tremble a bit from excitement. I love the idea of eCommerce from what I’ve read here so far, and I’ll definitely do some more on the subject.

    Just from a logistical viewpoint: I’m from South Africa, a much smaller country than USA with a lot less opportunity for finding ‘profitable niche markets’. Obviously it would be ideal, if I did something like this, to cross international borders with my sales.

    So my question: do you perhaps have any thoughts on troubles I might experience in doing eCommerce as someone outside the boundaries of my target market? And are they problems that might be overcome without needing so much extra capital/time/expertise etc. as to defeat the purpose of the whole idea?

    Thanks for doing what you do while also inspiring and being generous with your info!

    • Dejan

      Hi, Arno.

      I set up almost all of my eCommerce businesses from my home.

      One of the greatest advantages of the Internet is that it removes geographical borders. It doesn’t matter where you live; applying principals like arbitrage allows you to trade anywhere.

      Have you read my Vagabond Business Case Study, yet? In it, I explain the business model in more detail.

  3. Haris

    How does it work when it comes to paying the supplier? You obviously take the money via Paypal upfront from the customer, then deduct your profit from this, but do you then have to manually pay the supplier the remainder? Or does the supplier invoice you monthly?

    • Dejan

      Hi, Haris.

      Initially, we manually pay the supplier for each order. Once we’ve made 50 – 100 sales, we contact the supplier and negotiate weekly or monthly billing.

  4. Suzana

    It all sounds great and very intriguing. I only have one question. You can absolutely everything you might think of to buy on the internet right now. And people like to find the product let’s say on Amazon, because it’s cheaper there. So how do you convince people to buy from you if many other websites sell the same or similar stuff and sometimes even cheaper. Thank you in advance

    • Dejan

      Hi, Elizaveta.

      People generally buy from the person in front of them, especially when the person in front of them has the right message. A percentage of your customers will shop around, but the number isn’t big enough to prevent you from making a killing.

      The other option is to sell information based products. They are unique to your business and far more profitable than physical products in the long run.


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