What exactly is a niche market? It refers to a group of consumers who have a very specific need that is not being filled by conventional products or services. An organic food store would be an example of a business catering to a niche market. The organic food store provides foods grown or processed in a specific way to provide their customers with healthier eating options.

Benefits and Problems With Niche Markets

The biggest benefit of a niche market is reduced competition. The wider the customer base the more likely completion will try to capture a larger piece of the economic pie. The organic food store example will have fewer customers and products than a full service supermarket but their customers will be loyal because they have a reason, other than price, to shop there. They are looking for healthy alternatives in their food purchasing decisions. They are prepared to pay more to achieve that alternative.

The downside of the niche market is the customer base. Are there enough customers out there that need the products or services you are providing? Is the market big enough to keep the doors open? Just because organic foods command a slightly higher price doesn’t mean they automatically produce a higher profit margin. There are limits to what the market will bear.

Four Main Questions to Consider

If you are planning to tackle a niche market, there are some questions you need to ask yourself to determine if your plan will be profitable.

1.     Is the need there? Are there enough customers to support the business from startup to break-even? Is the risk worth the reward?

2.     Can I economically reach my niche market with advertising? Advertising in mass media to niche groups would be a waste of money. The major of those exposed to your message are not your market. You might have to resort to a more targeted advertising method that could be more costly.

3.     Is the market truly underserved? Many supermarkets have an organic section. Will those small sections take enough market share to torpedo your idea?

4.     Location, location, location. It would be great if you had a health supplement store on one side and a fitness center on the other but chances are that’s not going to happen. So where you locate can be critical to your business success. Many of your customers are going to have to go out of their way to get to you.

Some Final Thoughts on Niche Markets

Even if you are not starting a strictly niche business you can still make niche marketing work for you. Many existing businesses identify needs that are not currently being met by their competitors. Financial advisors may work with people of all ages, but if they specialize in senior citizens, it won’t take long for the word to get around. A bakery might specialize in creative wedding cakes. A shoe store might be the best choice for larger or smaller, hard to find sizes. There are many ways to make niche marketing improve your bottom line. Is there a market you’re missing out there?

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