Another name for a market niche is market segment which have products or services that have similar characteristics.
An example is the fruit juice segment which is part of the total beverage market.
To be effective in marketing your small business, identifying and competing in a market niche is the only way to go. The reason is that it is more cost effective, your marketing communication is more targeted and you can achieve greater results.
If you are just starting out or if you want to expand your product or service range you may want to consider the following before you start competing in a particular market niche.
Competitors
Unless you are developing a new market niche which is pretty expensive, then you need to know how many competitors you will be facing. If there are only one or two established competitors then the niche may not be large enough to compete in. Or it could mean that they “own” the segment and will benefit from your marketing, probably more than you will.
If there are many product or service offerings then this could mean that the market is very competitive, price sensitive (because everyone is fighting to gain customers) etc. You will have to fight hard just to be heard above all the noise that others are generating.
Customers
You need to see whether the customers who buy the products or services are brand loyal or choose a number of brands within the market niche. If they are brand loyal then again it can be expensive to break down this loyalty. Also look at how many times they purchase over a year. If it is only once or twice then this will mean you will always be looking for new customers, unless the price per purchase is high.
It is also a good idea to get an estimate of the number of customers who buy within the niche. There are a number of reports, papers, news stories etc that are published to give you an idea as to whether there are enough customers to attract and retain for your brand.
Trends
One important area you need to keep up with is the trends that are occurring in your market niche. Everyday you will probably read that this market niche is “hot” and or that market niche is declining. The key here is identifying fad segments versus those that have long term potential.
Keep up with the industry news and be alert to warning signs as you do not want to compete in a market niche that is going to be viable for only a few years.
Over to you, please share your tips on how to indentify viable market niches.
Susan, I have to save this entry for future reading. Have you read my comment on Shawn’s interview with Cindy King on bizSugar blog?
Have you heard about the concept category creator? Example: First ordinary travel suitcases and then they added wheels to them. It was first catered to the aviation personnel so they could move their luggage in a quick way. Then it got popular with the travelers and how you almost see wheels on every luggage.
The company I have started to work with is belonging to “the fruit juice segment which is part of the total beverage market.” They also have fine bottled water and a new “category creator” that is really a specialized product within the fine water niche. (For more information on seabuckthorn and fine natural mineral water, click on my name.)
What kind of tools are you using in order to identify viable market niches, including competitors, customers and trends? I am thinking of testing to get date through “Human Intelligence Tasks” powered by Amazon’s Mechanical Turk. I have been talking with Brent Frei of SmartSheet regarding this matter.
Hi Martin,
I haven’t read your comment yet on the interview, but will do so. One thing to note if you are going to be a category creator, then it usually takes more money and time to gain awareness, trial etc. These categories usually take off when a competitor or 2 enter the market as there are now 3 brands promoting the segment. The inital brand can get the most lift from this as they were the first.
Usually there is market and trend data available especially for your type of product as well as trade magazines, press, industry reports, maybe Ibis data and look at overseas data eg. US for trends. For compeitors do searches, if sold in supermarkets there is data available to buy. Also buy each of the competitor’s product and compare them with yours including the claims they make. I will look at the Human Intelligence Taks.
If you need further information just email me.
Susan
The fine water site is under construction. I will send you an email for further information.
I look forward to getting the email Martin