Niche marketing is a strategy which premise is to target a subset of a market that can be of various sizes. Where a marketing strategy focused on the whole potential market used to be effective when mass advertising was possible. A niche marketing strategy can help position your brand more efficiently, nowadays.
- Why Niche marketing matters
- In the short-term, we’re all starting from a niche market
- Niche Market = Strong demand
- Niche Market = Low competition
- Niche Market = High margins
- Finding your niche
- The era of Gatekeepers
- The case for the Microniche: Zooming into existing markets to find Blue Seas
- Drilling down to your Minimum Viable Audience
- Bootstrap to create options to scale
- Blue Sea Strategy vs. Blue Ocean Strategy
- Connected Business Concepts
Why Niche marketing matters
While in the past, it was possible through mass marketing and mass advertising to reach a massive audience. With the advent of the web, it has become possible to target particular segments of a market with a laser focus approach.
How does a niche market look like?
It can be broken down based on many specifics, things like:
- Psychographic (interests)
- Demographic (age, income level, gender, education)
- And more
For a complete guide on Market Segmentation check this out.
In the short-term, we’re all starting from a niche market
True, their founders did have (in some cases) a big vision. On the other hand, they started very – or relatively – small. Before Amazon expanded to pretty much sell anything, it was an online bookstore.
Before Facebook would become the largest social network on earth, it wasn’t the first player to come in (it was a late comer), but it had a very focused strategy, based on a staged rollout. Facebook made sure to open up, one campus at the time, and only when it had a waitlist that ensured high adoption, it opened up to the next college.
In short, before Facebook would become the social network for everyone, it was explicitly thought for specific campuses in the US.
Therefore, when you’re starting up, it makes sense to identify a niche market. This can be based on several factors, such as opportunity, understanding of the segment, passion, and more.
An excellent way to find a niche might be to mix all those factors:
A niche market is the best place to start for three primary reasons.
Niche Market = Strong demand
A niche market is usually unfulfilled. As large corporations take most of the market share of a broader market, they also tend to standardize service and product, at the point of leaving out a small segment of it. That is where the opportunity lies.
A large business operating in a large market can hardly accommodate the needs of all the niches within that market. Those unmet needs are where you can build a business. The search engine DuckDuckGo has built a company where Google could not.
Indeed, DuckDuckGo (DDG) started very late (around 2008), over a decade after Google. If Gabriel Weinberg (DDG’s founder) would have told someone he was creating a search engine, chances are none would have made sense of that move.
However, he started by looking at where Google was weak. And among those weaknesses, there was privacy. Google (now Alphabet) makes money primarily via advertising.
Over the years, as privacy concerns arose, DuckDuckGo grew on top of that. In August 2018, DDG got another round of investing for $10 million. Thus, getting ready to scale up.
Niche Market = Low competition
For how much we love the mantra of competition, as Peter Thiel, founder of PayPal mentions in his book, Zero to One, companies that dominate markets and reduce competition, so-called monopolies, are also the ones that hide this fact for as long as possible as low competition enables them high margins and status quo.
For a company that is starting and it is niching down, a small segment of a broader market helps kick things off. Imagine the scenario where other larger competitors are already serving that segment that would require massive resources for the niche player, thus making it extremely hard to build a company in the first place.
Niche Market = High margins
Building a successful company and a viable business model is also about guaranteeing high margins. Part of those margins can be reinvested back into the business.
A niche market usually has a strong demand and lower competition, which makes it easier for the niche player to charge higher prices.
Finding your niche
The web enables you to look for your niche pretty much all over the world. A few thousand people looking for bread recipes, or raw food can be a good place to start.
Search volume for a keyword like “raw food recipes” across the US and other countries
The web enabled anyone to start a business with limited resources. On the other hand, you better understand what people in that niche are looking for, and you connect with them.
Thus, rather than just creating a business, you might want to build a community first.
You better make sure to create a sense of intimacy with your community.
Where large brands can’t build this sense of belonging, that is where a niche player would be a way better option for that segment!
And This is where you have the opportunity to build your next business.
The era of Gatekeepers
In the era of gatekeepers, It becomes commercially viable to start from the smallest possible audience. That smallest possible audience will help validate your idea, but also gradually grow it.
Gradual doesn’t mean necessarily slow growth. In many cases, if the growth strategy is organized around a staged roll out (you open up your products to wider and wider groups of people) it can pick up quickly.
The advantage of using this strategy is threefold:
- Offer value where the giant gatekeepers can’t.
- Scale the product gradually, to validate it, but also to create built-in scalability. A product that is available to 100 people is not the same to a product available to 1000 and perhaps a million. This will require a redefinition of its value proposition at each step. Skipping this step might break your business.
- If you gain traction that is also a signal of validation to potential investors, which puts you in a better position, to ask for funding, if those can help to grow further or perhaps consolidate your position.
The case for the Microniche: Zooming into existing markets to find Blue Seas
As we’re living in an era where the web has created many new industries, some of which are now mature. This makes us redefine the concept of niche, in those markets.
Perhaps if you decide it makes sense to build a website or an app. While you can do that with limited resources, you will find yourself in a read ocean, made of many existing alternatives, that are so similar to yours, costumers will not perceive it as valuable.
In this read ocean, it’s extremely hard to swim. Does it mean you should always look ten years ahead to find your blue ocean? Not really, I believe that a blue ocean can also be found by zooming into existing industries, to find micro audiences that are not satisfied with any of the products available.
That’s at the core of finding your microniche. Of course, instead of finding your blue ocean, you might initially find your blue sea.
This blue sea, much much smaller, partly covered by land, will be your territory.
The process of innovating by drilling down existing markets, is at the core of a renewed blue sea strategy, where you add the most value for a few, and yet that will be the basis to build your business.
Drilling down to your Minimum Viable Audience
As a simple example, imagine the case you’re staring a bookstore online. None would find that interesting. At least not today. This idea was already proved commercially viable by Amazon, at the and of the 1990s.
Therefore, you will need to zoom into the publishing industry and curve out your own niche first.
For that, the major gatekeeper in the publishing industry can help you out. You can use Amazon search engine to identify your own category. This is only the first step.
To make the exercise of finding your micro-category viable you need to drill down at least three times to what you might think is a viable audience.
Thus, if you start from fiction, this is the process:
- Within the several possible categories, pick yours. What about starting from fiction?
- Within fiction you will look for a specific sub-category, perhaps historic fiction.
- Within historic fiction, you will look for another specific sub-category, what about historic fiction, focused on Renaissance?
Now you found your microniche. What about building up the best website/blog about Renaissance Historic Fiction?
How do you know there is a viable audience for that?
One simple way, perhaps, is to look at the volume of search in that category, especially for the most known authors (you might be surprised to find out there are micro-stars also within that microniche).
For instance, Johanna Lindsey is a great example of an author that has an incredible engaged following in a microniche. This is an example of how you kick things off and find your Minimum Viable Audience.
Bootstrap to create options to scale
If he wanted, he could have invested massive cash upfront to try to compete with Google.
Instead, he did something else. He started to code the search engine on its own, and he curved the (at the time) a microniche for DuckDuckGo, a search engine focused on privacy.
Only later, after validating the idea, DuckDuckGo turned into a larger company. In this specific case, Weinberg had the technical skills to get things off the ground but also the cash from a previous successful exit to start in a more grandiose way, without validation.
Instead, he tested, validated, iterated quickly, and then he built options to scale. Its search engine turned into a larger organization, made now of dozens of employees.
Blue Sea Strategy vs. Blue Ocean Strategy
In a Blue Ocean Strategy, there are five core concepts:
- Create an uncontested market by looking beyond the boundaries of existing markets. Therefore, a Blue Ocean starts by zooming out, way out, to see how this new market might look like in a decade to come. The Blue Sea Strategy instead looks at existing markets and it zooms in as much as possible to find a minimum viable audience.
- In a Blue Ocean Strategy competition is made irrelevant by changing the business playground. In a Blue Sea Strategy competition is made irrelevant by redefining value for the minimum viable audience, that is not satisfied in full by existing products available on the market.
- In a Blue Ocean Strategy new demand is captured by being the first-mover or among the first movers in a new market. In a Blue Sea Strategy you can be very late and still build a valuable business. That’s because the Blue Sea player will redefine value by going where the existing, established players can’t, perhaps because it would be to expensive for them, or an audience so small that is not threatening.
- Where the Blue Ocean Strategy breaks the cost-value trade-off (offer more at a lower cost). In a Blue Sea Scenario, your smallest viable audience will be so keen to support your business, to be happy to pay you a premium price for your product, as soon as you keep it tailored to them.
- A Blue Ocean Strategy looks at the future, it envisions it and it builds it. A Blue Sea Strategy instead, looks at the past and it redefines it for the smallest audience that didn’t like how that future turned out to be.
Connected Business Concepts
Additional business resources:
- Types of Business Models You Need to Know
- The Complete Guide To Business Development
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- What Is Market Segmentation? the Ultimate Guide to Market Segmentation
- Marketing Strategy: Definition, Types, And Examples
- Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
- How To Write A Mission Statement
- What is Growth Hacking?
- Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas
- How Does Facebook Make Money? Facebook Business Model In A Nutshell
- Tesla Business Model In A Nutshell
- How Amazon Makes Money: Amazon Business Model in a Nutshell
- How Does WhatsApp Make Money? WhatsApp Business Model Explained
- How Does Google Make Money? It’s Not Just Advertising!
- The Google of China: Baidu Business Model In A Nutshell
- How Does Twitter Make Money? Twitter Business Model In A Nutshell
- How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
- How Does Pinterest Work And Make Money? Pinterest Business Model In A Nutshell
- Fastly Enterprise Edge Computing Business Model In A Nutshell
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- TripAdvisor Business Model In A Nutshell
- How Does Fiverr Work And Make Money? Fiverr Business Model In A Nutshell