Market niche (engl.) " Marktnische (de.)

What is a market niche?

Market niche is a marketing term for small but profitable segment of a market that is particularly suitable as a target audience for a specific product. The market niche defines the specific product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact.

Market niches do not exist by themselves, but are created by identifying needs or wants that are not being addressed by competitors, and by offering products that satisfy them. If a competitor is already working with this specific segment of a market, that market has become a ‘not-niche’.

The process of finding and exploration of niche markets is called niche marketing.

What are the advantages of niche marketing?

The main advantage of the niche marketing on the mass marketing is the lower if any competition that allows the small starting businesses to become an expert on a specific field on relatively low costs. But even the largest businesses direct their marketing to the care

fully selected market segments, as it is possible to maximize the effectiveness of the marketing activities by targeting the niche audiences.

As a specialist on a specific market a company can perfect its services in order to fit its customer expectations. As a first provider of a product or a service the company is likely to have a privileged market position, when other businesses decide to work on the same market. The first provider has a good chance to keep a significant part of the market.

The experience shows that especially on the Internet niche marketing strategy is more likely to bring high revenues.

Dr. Ralph F. Wilson, an international authority on Internet marketing and an author of some fourteen books on the subject, underlines the reasons for the niche marketing strategy:

"I've been asked dozens of times, "What would it cost to build a book store just like Amazon.com?" I grind my teeth. With all the opportunities begging to be explored, why would you want to challenge the top dog? I answer that question by saying, "It would cost you the millions and millions of dollars Amazon spent to build its store." Look instead to the niches." (WILSON n.d.)
 
How does niche marketing on the Internet work?

The online niche marketing can be described as a five steps cycle.

1. A Niche Business Idea: The first step of finding a niche market is having an innovative and profitable unique business idea focusing on market segment with less or no competition. A niche market can only be built on an innovative and unique business idea. A niche business idea should align with Maslow’s highest need levels of the potential customers. Divergent thinking and criticizing traditional markets is helpful in finding a niche market idea.

2. Most Detailed Market Research: Before blindly investing in a business idea, it must be made certain that there are no competitors. Market Research is needed to know how many potential customers exist for the business idea. There are lots of ways to learn market size. If it is possible, a good market research company should be hired, otherwise social networks are the best tool to research potential of a niche market. For example, if the potential audience is business people, business social networks like Xing are the best places to look for. Also, hobby sites and special forums and even Google can be very helpful. Internet provides more ability to target than traditional media. Product or service creation becomes easier since it is known which people are potential customers for the product.

As most of the activity on the web is keyword driven or powered, finding the potential customers on the web means finding the keywords or phrases they are using to search for the products they want to acquire. There are different keyword research software like Nichebot or Keyword Elite and online sites like WordTracker to find the profitable keywords in the respective niches.

The extensive keyword researches are made to find out exactly what people are looking for on the web, how many searches are made each month and the keyword ratio or competition for the niche keywords before any content is created. It is recommended to search for the ‘Long Tail’ - a whole long list of keywords or keywords phrases that relate to the niche, like for example “yoga fitness mat” instead of simply “yoga”. Creating webpages or content for this Long Tail has proven to be more profitable then targeting general popular keywords.

3. Financial Research: A good financial research is necessary before a niche business get started. Theoretically, niche businesses bring high margin of profit to their owners. But if there is no income model then it means it is a question how to make money from this niche market. It is necessary to know exactly how much the potential audience is ready to pay for the niche service or product. Because over estimation will be a reason for high spendings and at last undesirable bankruptcy. It is also important to calculate the total Investment required for the business.

4. Internet Marketing: A niche marketers’ first task is to communicate the key messages to the audience. The web has very broad reach capability and has passed the other mediums’ reach level. Internet gives more ability to target the customers. Profiling and segmenting customers is easier than the traditional mediums like television. Internet advertisement can show who clicks the ads and come to the website to buy the services or the products. Internet marketing activities are all easily measurable and the customer reactions can be immediately seen.

One of the most important tricks for the Internet marketing is making the customers feel themselves as a member of an invaluable community in order to use the network effects. This is hard because state of belonging comes with the time and good experiences. An efficient tool named ‘Social Networking’ makes it easier.

Interactivity is another advantage of Internet marketing. The increasing ease of use makes the Internet the most interactive marketing media. Consumers want and like to comment on the products or the services; to respond their wishes quickly can become a key to the success.

5. Innovation: Initially, an innovative niche idea is a start for the business. But innovation becomes more important if a company succeed starting and running a niche market business. The competition will appear very quickly. There will be many competitors who want to take over the market; even the super niche markets face competition.

The key action to protect the business is living with innovation. The services or the products must be improved frequently by product/service innovations; so before the competitors copy the idea the business must serve new features to its customers.

Another type of innovation is user experience innovation. Usability of the products or the services, how the consumers feel when using the products or the services, how they can reach the company when a problem occurs, the CRM capabilities and some other touchpoints are as important as the products or the services themselves. The level of the user experience must be controlled in order to make sure it is high-level. Every niche business is cycling through these five steps in order to survive.

Sources:    

Business Dictionary.com: Market Niche, in http://www.businessdictionary.com/definition/market-niche.html
Definition from Answers.com: Market Niche, in http://www.answers.com/topic/market-niche
Gordon K.T.: 3 Rules for Niche Marketing, in http://www.entrepreneur.com/marketing/marketingcolumnistkimtgordon/artic...
Hoskins, T.: Online Niche Marketing And Your Bottom Line, in http://www.buzzle.com/articles/online-niche-marketing-bottom-line.html
Ozkan, E.: Five Key Steps to Successfully Niche Marketing On The Internet, in http://siteboat.com/five-key-steps-to-succesfully-niche-marketing-on-the...
Perren, P.: What are the advantages of niche marketing?, in http://www.bestaffiliateproducts.com/advantages-of-niche-marketing.html
Wiktionary: Niche Marketing, in http://en.wiktionary.org/wiki/niche_marketing
Wilson, R. F.: Niche Marketing: How to Define a Unique E-Business Niche, in: http://www.wilsonweb.com/articles/niche-marketing.htm

Tags: marketing, market niche, internet marketing, market research