⌚ 4 min read
That’s how many small businesses there were in the United States in 2020, according to the U.S. Small Business Administration.
That number is of course spread across various industries and sectors; but it does highlight the fact that no matter what area a business is operating in, there is going to be a high level of competition.
The question then becomes, “How do I set my business apart among all of these competitors?”
We’re sure you’ve heard about niches and how absolutely necessary they are, but unless you’re a marketing expert, you still might not be that sure about what a niche is exactly.
Let’s break it down.
A niche is a subset of the overall market a certain product or service aims to serve. It’s there to address specific market needs, which in turn affect product/service features, price range, quality, and the demographics of the target audience. It focuses on a smaller group of potential customers rather than the entire broader market.
For example, pet care is an almost $100 billion industry in the United States. As soon as you walk into a pet store, it’s more than obvious that the market is oversaturated with brands. In this case, pet care is the broader market. A niche within this industry is organic pet care. A business operating in this niche would focus on eco-friendly features in their products and messaging, probably have a higher price range, offer higher quality products, and target consumers that are concerned about sustainability and eco-friendliness.
The benefits of using a niche marketing strategy include differentiation from competitors, a more appealing offer for a subset of customers, and increased profitability.
Step 1: Get acquainted with the competition
Creating a strategy starts with getting to know who your competitors are and how they’re running their businesses. Once you have a good idea of where your competitors are playing, seek out any segments within the broader market that they’re not appealing to.
Step 2: Identify what your customers need
Niches are all about drilling down to the specifics. If you find an underserved segment of the market in step one, step two is to research the potential customers of that subsection and determine what they’re looking for and what challenges and problems you could provide a solution to.
Back to the pet care example, even if there are other players in the organic niche, figure out what you can do better and make that your unique value proposition (something you do differently enough that creates value so that customers would rather choose you over your competitors).
Step 3: Determine if your niche will be profitable
Once you’ve figured out what you’re offering and who you’re offering it to, you have to make sure it can generate a profit. As you’re finalizing your niche, consider the following:
Remember that too many competitors makes for a tough situation, but no competitors is also a bad sign. It could be an indication that there isn’t even consumer interest to support that particular niche. Ideally you want to shoot for a niche that is somewhere in the middle.
After determining your profitable niche, you’ll want to drill down into your customer personas so you can begin marketing effectively to those who are most likely to value your product or service. We talk about creating customer personas in this blog post.
This was a quick rundown of how to create a niche, but it’s an important concept to get right when starting a business. So important that we’ve dedicated several lessons to creating and perfecting a niche in our Intro to Business course. If you're serious about running a successful business, this is the course that will get you there step by step.