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What is a niche market and how to define it? [step by step]

A niche market is a group of consumers with specific needs not yet met by any product or service. While a market segment is a broader group, the niche represents an even smaller share among these people and has not yet been explored by any company.

If you work in commerce, you’ve probably heard about the importance of defining a niche market for your business. But do you know what that term means and, more importantly, how to do it?

To delve deeper into the subject, over the next few lines, we will dedicate ourselves to understanding what a niche market is, why it is so important to define yours and how to do it. Finally, we separate exclusive tips to help you dominate your niche market. So, are you ready to get started?

What is a niche market?

A niche market is a group of consumers with specific needs not yet met by any product or service.

For many people, niche and market segments can be understood as synonyms, but in reality, they are not. While a market segment is a broader group, the niche represents a smaller share among these people and has not yet been explored by any company.

Niche market example

So that we can better understand this concept, let’s think about a sporting goods company focused on swimming. If we stop here, we already have a market segment — that of swimmers — but it is still possible to find a niche.

In this case, we can think of a very specific need for those who train practically every day in the pools: hydrodynamic swimsuits or swimming trunks that are very resistant to chlorine. Now, yes, we have a niche market.

In this way, we have:

Market > Segment > Niche;

In the above example, we could see:

Sporting goods > swimming goods > ultra-chlorine resistant swimsuits and swimwear.

How important is it to define the market niche?

Now that we know what a niche is and the existing forms of segmentation, it’s time to understand the importance of defining your market niche. Check out:

Assertive actions

By knowing exactly the audience you want to reach and the problem you want to solve with your product or service, the actions provided in your marketing plan become much more effective.

That’s because you’ll understand how, when, and where to talk to the people for whom that solution is intended. That way, the chances that you will waste money on stocks whose ROI (return on investment) is not so good decrease.

Lesser number of competitors

Imagine that you decide to sell clothes and you don’t define a market niche. Have you ever thought about the big brands with which you would need to compete for your consumer’s attention?

When you define a niche, it is because there are few companies offering a suitable solution for an audience that demonstrates that need. In this way, the more specific the product or service you offer, the fewer the number of competitors.

Acting in a niche where your knowledge works in your favor

A tip for defining your market niche — which we will delve into later — is to invest in a subject that you master. Think about how this can make your job easier.

Developing digital marketing actions, content for a blog, and descriptions for products in e-commerce are some examples of activities that have a lot to gain if you focus on what you understand.

Higher probability of loyalty

When we talk about pioneering companies, the chance of customer loyalty increases. Thinking about niche markets, if your business is the first to bring a product or service to meet a need that was not seen before, consumer trust will be won.

Of course, your product needs, in addition to proposing to solve a problem, to actually solve it and your company must have other attributes, such as good customer service, to make the experience positive. But the first step is to look at a specific group and help them.

Easier to find partnerships that work

Whether talking about product suppliers or digital influencers, when you have a very well-defined focus, it becomes simpler to identify partnerships that may or may not work.

Again, knowing the specific needs of your niche will give you clues as to whether, for example, a specific material from a clothing supplier will please your customers or not.

Types of niche markets

When we talk about segmentation — a fundamental step in finding your niche market — it’s important to know that there are several ways to divide a consumer market. Let’s meet them:

Geo-targeting

This type of segmentation is done according to the geographic location of the audience. Through it, it is possible to identify opportunities in neighborhoods, cities, regions, states, countries, and continents.

In this case, this way of identifying a potential market ends up serving physical establishments much more than digital ones. This is because it is possible to detect places where there is a shortage of the store or service you want to implement.

Demographic segmentation

Demographic segmentation is based on population information, such as:

  • Age;
  • Genre;
  • Income;
  • Occupation;
  • Education;
  • Marital status.

Based on characteristics such as those mentioned, the company can choose and define the aspects it wants to focus on. For example, it is possible to determine the segmentation of an audience of women, between 40 and 55 years old, of class C.

Behavioral segmentation

Here, the idea is to segment the consumer market according to their consumption habits. So, you should group the audience according to their behavior when they go to buy something.

If you choose this model, consider data such as products these people are looking for, their brand loyalty, and price sensitivity, to name a few.

Psychographic segmentation

Finally, psychographic segmentation is related to consumer habits, lifestyles, values, fears, and pains. Some examples are companies that offer products not tested on animals, focusing on the group that has veganism as a principle.

This type is close to the characteristics sought to define personas, that is, the ideal customer of a business.

How to define your niche market?

Knowing the importance of the market niche, it’s time to check out the tips so you can define your online store. Check it out below:

1. Choose the market and segment in which you want to operate

Before defining your niche, you need to know the market and the segment in which you will operate. As we saw in the example at the beginning of the text, you should increasingly specify your area of ​​expertise.

To make it easier, let’s look at another example:

  • Market: cosmetics
  • Segment: hair products
  • Niche: Vegan products for frizzy and curly hair

To get to that point, do some research on these areas of expertise — we’ll learn about tools for that later. That way, you’ll have more assurance that the niche you’re choosing makes sense.

2. Identify your skills

It may seem tempting to opt for working with the best-selling products or the most sought-after services. Obviously, this should be taken into account, but it shouldn’t be the main criterion for your decision.

A good tip is to work with subjects that you understand more than most people. In this way, your work will become lighter (ratifying that phrase by the philosopher Confucius: “work with what you love and you will never have to work again in your life”).

Plus, you’ll have more authority to make decisions and identify what your audience needs. Do you see how your company’s chances of success increase if you work with what you’re good at and enjoy?

3. Find a problem to solve

In order for you to be able to reach your niche market, you need to identify a need for a specific audience that few or no companies have looked at yet. From there, you will be able to think about the solution that you could present through a product or service.

If you are building your company right now, a good way to structure it around this solution is the Lean Canvas model. Through this one-page document, you will be able to clarify for yourself and even potential investors what the purpose of your company will be, specifically in relation to the niche and the problem to be solved.

4. Assess whether your idea is economically viable

After defining the market, segment, and niche, based on the problem to be solved, it is time to assess whether this company will be economically sustainable.

For this, you must look at two things: demand and competition. In general, these two quantities are proportional. That is, normally, the greater the demand, the greater the competition — and vice versa.

Therefore, the ideal is that you find an intermediate point. That way, you should find a niche where there are still a considerable amount of people who would buy your products or services, but where the competition is not that great.

5. Do an analysis of the competition

Finally, after evaluating all the previous points, it’s time to look at who is already in the market and do an analysis of the competition.

When we talk about niche markets, we try to offer innovative solutions. So, to know who your competitors are, don’t look at those who offer the same products or services as you, but at those companies that compete for the same audience, you want to reach, with similar options.

Free tools to help define your niche

So far we have talked about many aspects that the entrepreneur needs to be aware of before defining the niche market in which the company will operate. So, now let’s get to know some free tools that can help you in this process. Look:

1. Google Keyword Planner

Google’s Keyword Planner is a tool through which you can query search terms and understand consumer behavior when searching the internet.

With it, you can see if certain keywords are popular and suggestions for other related terms — often more specific, which helps when defining a niche market.

This tool is a feature of Google Ads and can be used for free.

Through Google Trends, it is possible to know the search trends from around the world and also filtered by country. By making a query for a specific term, you can know your search volume by region, in periods selected by you.

That way, you can identify subjects in which interest is growing. If you are thinking of investing in a niche, this tool can indicate whether it is on the rise or not.

3. Google Maps

Recommended for anyone thinking of starting an establishment or physical store, Google Maps itself can be a good tool to identify areas in which it is worth investing.

For example, if you are thinking about opening a beauty salon in the neighborhood of Westminster, in London, just search for the term “beauty salon in Westminster” on the website or in the app so that all the options available there are shown.

That way, you can see whether geographic targeting for the business you thought about opening would be a good idea or not. After all, if there are already many options in the region, competition can be great.

4. KWFinder

KWFinder Logo

KWFinder is a keyword planning tool. In addition to the features presented by the Google planner, with it, it is possible to see the main results presented for a given search — which allows you to see if there is already a solution similar to the one you thought for your niche.

In addition, you can analyze some aspects of competitor sites, such as the volume of monthly visits and the most visited pages.

5. Quora (and other forums)

When it comes to unmet needs, online forums are a great way to see what they are. That’s because, often, when they don’t find content regarding their doubts, users turn to these channels as a last resort.

A great option is Quora, a site where people can ask and answer questions from other users. That way, by seeing what people want to know about a specific topic, you can glean valuable insights.

6. Social networks

Finally, social media offers countless opportunities for anyone who is in the process of defining a niche market.

A first possibility is Facebook groups. You can participate in those that deal with subjects you are thinking of investing in and observe what people say there. This kind of “listening” can bring great ideas to your business.

Plus, on Twitter, you can follow what people are saying about brands that might be your competitors. Sometimes, a complaint from someone can help you to identify a need of the people in that segment.

Finally, Instagram offers the possibility to follow hashtags (subject tags indicated by the hash symbol #). You can select those that have to do with the niche you are thinking of working in and follow publications about it.

It is also always good to read some comments on competitors’ posts on the most diverse social networks. It is possible that a new opportunity will arise in this channel.

How to dominate your niche market and become an authority?

Once you’ve defined your niche market, it’s important to focus on becoming an authority within it. That’s because, by dominating your niche, people tend to trust your brand and have the product or service you offer as the best solution to meet their needs.

Getting to dominate the market niche is not an easy task, the process tends to be long and full of details. So, to help you on this journey, we separate some strategies that can be used. Check out:

Produce quality content

Content marketing is an efficient way to become an authority on a subject. Through this strategy, you can attract visitors by creating quality content that generates value, and, over time, the target audience can see your brand as an authority within a certain niche.

You can invest in different formats, such as:

Provide the best customer service

With numerous companies offering similar products and services, good customer service has been a decisive factor in attracting and retaining consumers.

This is because, nowadays, people are looking for a unique experience when shopping. Therefore, to stand out within your market niche, your company needs to invest in customer satisfaction and in differentiated strategies to provide outstanding experiences, such as:

  • Be present throughout the customer journey ;
  • Solicit and respond to consumer feedback ;
  • Offer personalized service ;
  • Personalize the shopping experience ;
  • Conduct satisfaction surveys.

Invest in visual identity

A well-made color palette and a well-structured logo are great allies when it comes to attracting customers. Since the elements of your brand’s visual identity have the ability to impact people and make your business remembered.

In this way, it is essential to put together a good visual strategy for your company. Think of colors that make sense with the purpose of your brand and are related to the products offered. Using color psychology to define your business is a good strategy.

For example, if you own a handmade soap store, a great option is to include the color green in your color palette. This is because green is associated with the environment, sustainability, and health. In addition, color has the ability to relieve stress and calm.

Ready to define your niche market?

We hope that this content has helped you to understand everything about the niche market. That way, you can define yours and ensure more precision in your company’s strategy.

Niche Market FAQs

What is a niche market?

A niche market is a group of consumers with specific needs not yet met by any product or service.

Why is it important to define the niche market?

1. Enables assertive actions;
2. Offers fewer competitors;
3. Acting in a niche where your knowledge works in your favor;
4. It has a higher probability of loyalty;
5. It makes it easy to find partnerships that work.

What are the types of niche markets?

1. Geographic targeting;
2. Demographic segmentation;
3. Behavioral segmentation;
4. Psychographic segmentation.

How to define my market niche?

1. Choose the market and segment in which you want to operate;
2. Identify your skills;
3. Find a problem to be solved;
4. Assess whether your idea is economically viable;
5. Do an analysis of the competition.

How to dominate your niche market?

1. Produce quality content;
2. Provide the best customer service;
3. Invest in visual identity.