Niche marketing is one of the most effective ways to make a lot of money off the web. It’s about taking a general market and stripping it down into targeted and focused segments or niches. One then develops solutions that meet the needs of a specific segment.
Banks for example operate in many niche markets. At first glance, they may appear to focus on one market, the financial market. There is no doubt that this is correct, but banks perform a number of different functions by serving many different niches.
A typical bank has a number of products and services, such as:
- Investment products
- Home loans
- Vehicle finance
- Financial planning and
- Personal loans
Each product or service caters for a select group of individuals or niche market: Investment products for investors, vehicle finance for vehicle owners, home loans for real estate players, financial planning for seniors or retirees and personal loans for individuals seeking short-term finance.
Does this mean that a bank offering the above-mentioned services is able to compete equally well against all other banks in the respective service categories? Generally it’s very difficult for a business to dominate every market it participates in, but it’s certainly possible for a company to establish a significant presence in a certain niche.
Of the four major banks in South Africa, ABSA Bank is the ‘go-to’ bank for home loans, Nedbank tends to be the business bank of choice, First National Bank is well known for their innovative products and Standard Bank for their stock trading platform.
Whatever the business or industry, a market leader will typically enjoy a healthy revenue stream. And by operating in other niche markets (not necessarily dominating them), a business can easily diversify or supplement its primary source of income. The same principle applies to online businesses.
Niche marketing works impressively well in the world of electronic commerce. VirtualBank for example is an online bank that specialises in providing financial services over the internet. Google dominates the search engine market and News24 pride themselves on being the premier news source in South Africa.
What does this mean for your online business, pick a niche market, sell some stuff and Bob’s your uncle? Unfortunately it’s not that easy. You can’t expect to start a new business, offer everything from A to Z, take on the major market players and become the overnight leader.
As a start-up, you simply cannot bite off more than you can chew.
You are not going to compete against News24 for news readers or against Amazon for book sales. However, you might be able to trump News24 in the sports news category or Amazon in the Self-help book category.
The point is taking on a niche market is one of the best low risk ways to start and grow your business. There are three good reasons for this:
1. Niche markets tend to be less competitive than larger markets. Your chances of being successful or dominating the market is a lot greater.
2. Niche marketing can be extremely cost effective. For instance, suppose your business sells books on dog training techniques for German Shepherds. Instead of designing mass marketing campaigns (television or radio) which could potentially cost millions, brochures and flyers situated at select dog training schools may be more than sufficient to attract customers to your business.
3. A niche market is a great way to build a business on a subject that you find interesting or enjoyable. It may be a good model for you to convert those hobbies or passions into a home-based passive income business.
Not too long ago I received an email from a reader asking whether it’s a good idea to start an online business in the mattress industry. If you have a look at Google’s Keyword Tool, you’ll notice that there are over 9 million online searches every month for the keyword ‘mattress’. With search volumes like this, the chance of finding a profitable niche market and business model may be good.
Starting your business with a niche market is a good idea. Most successful entrepreneurs will attest to this. However, niche marketing success is dependent on three basic rules:
1. Know exactly what your customers want. Your products and services have to appeal to your market’s unique needs. Building a business around mattresses in general may be pointless if your market only has an interest in mattress covers.
2. Learn how to communicate with your customers. You need to understand the psychology or deeper reasons behind their needs. In other words, speak their language and use marketing messages that evoke feelings of action.
How do your customers feel about mattress covers? What words resonate with them? If people are concerned about the ‘scratchiness’ of mattress covers against their skin when buying, your products and services must speak directly to this.
3. Understand your competition. How will you differentiate your business against all the other players? Look at their websites, products, services and marketing messages. Find out exactly what benefits they are selling. Try and pick out any gaps or under-serviced areas in the market. How could you do things better?
Are there any competitors in your niche? It may be a bad thing if there are no other players. The market may simply not want what you have to offer. Alternatively, the market is untapped and has yet to be exploited.
The key is to ask your customers what they want and value, and then test how they respond to your products, services and brand. This precept is central to niche marketing.