The success of any business idea depends upon the owner’s ability to identify the right niche market. Unless an entrepreneur carries out some solid upfront research about where the market for a product or service exists, they are not likely to find much commercial success.
Finding a product or service that people want is the single most important factor in how your business will fare.
Any budding entrepreneur seeking to make a mark in business would do well to get a firm handle on the wants and needs of their target market. There are four steps to crafting a niche market strategy. Let’s take a look.
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The 4 steps of identifying your business niche
Most business owners start-off with nothing more than a guess. Unfortunately, this is a quick way to fail. Instead, take the time to conduct thorough research first.
- Study your competitors.
- Find out how profitable your niche is.
- Research your target market.
- Test your theory.
Now let us look at each step in detail. Work your way through all of them and you will have a niche market strategy worth investing in.
1. Study your competitors
The easiest way to learn about your future customers is by studying the business model of your competitors.
What types of customers are they targeting? What is their marketing strategy? Pick up whatever you think will work for you. The very fact that your product or service has competitors should be reassuring in the sense that you now know there is money to be made with your product or service.
If for instance you are interested in conducting Tai Chi classes and are not sure if there is any demand for this ancient Chinese system of exercise in India, your research might pleasantly surprise you.
If you decide there is a sizable market for your product or service, you can move on to the next step of putting an appropriate marketing strategy in place.
2. Find out how profitable your niche is
Running a business is always tough and unless you expect to make decent returns from it, you shouldn’t consider going ahead with it.
Entrepreneurs often make the mistake of launching a product or service because they are “following a dream.” In order to avoid starting a business that will only earn very low profits, you must thoroughly study the market first.
If others have not been able to create much demand for a product or service similar to yours, there is very little likelihood that you will be able to do so.
Should you learn there is very low demand for your product or service, find one that is in demand.
An ideal situation for you would be that you would discover a fair number of competitors, but not way too many in your product or service category. That will tell you that there is money to be made in your niche and that there is enough space for a new entrant.
3. Research your target market
Once you have a fair idea of where your niche market may lie, go ahead and carry out some detailed research about its contours.
A great way of doing that is by finding out what people on social media channels like Facebook, Twitter, Quora and Reddit are saying about the products or services in question. It is important that you understand the problems they are experiencing so you can improve your product or service and thereby gain an advantage over your competition.
Join relevant social media groups or create one centered around your product and service and gather valuable insights. You can even offer people a free giveaway as a way to encourage signups.
Another great way of collecting information about your target market is the traditional way of carrying out surveys, albeit with the help of modern tools like SurveyGizmo or SurveyMonkey.
4. Test your theory
No matter how great you think your product or service is and how much you have researched your target market, you won’t know how well it will fare unless you put it to test.
This is important because it is far better to get out of a business that might prove to be an expensive mistake right at the outset than getting sucked into something you will regret endlessly.
Why do you think that the biggest multinational companies in the world test their new products relentlessly before releasing them in the market? They need to iron out problems on any front … and so should you.
Quite often, one is not able to get satisfactory results during the test marketing phase, not because there is no demand for the product or service, but because one has goofed up the messaging. No less a personage than India’s most respected corporate legend, Ratan Tata attributed the failure of the much-heralded Rs.100,000 Tata Nano Car to it being promoted as a low-priced car. For all its great features and value, people didn’t want to possess a car that was perceived as low-priced.
Many startups create a minimum viable product to test demand for a particular product or service. The emphasis here is on getting a product/service that solves a basic need into the hands of actual customers to gather feedback. A number of billion-dollar companies started this way — Amazon and Dropbox to name just two.
Success begins with a profitable niche market
It is very important for budding entrepreneurs to analyse the niche market they are targeting, before rushing to commit themselves. Not all new businesses are successes and one should carefully analyze one’s chances of success before taking the plunge.
Following the steps listed above is a reliable way of figuring out one’s chances of making a success of one’s startup or new business.
It makes eminent sense to test whether your chosen product or service is actually viable — creating a minimum viable product is an excellent way to do this. Testing will enable you to take any remedial measures if required or move on to a more promising product or service.