The easy thing is to say that "nowadays everything is invented", that there is no room left for innovation and that the safest thing is to improve or perfect an idea already implemented. Yes, this is the easy pathway that most companies take, but nevertheless, market niches do exist. They are created and then disappear with the same rhythm as of the life, society and of the business practices that engender them. What today may seem like a terrible idea can be a great opportunity in a few years’ time, and vice versa.
This brings up an important question. If they do exist why are they the path seldom taken by entrepreneurs and businesses? After all, capturing a niche market is a dream start for a continued profitable run for a commercial entity. However, the reason to doubt a niches’ existence stems from the difficulty that is usually encountered when identifying one that is profitable for the entrepreneur. Furthermore, there is a dilemma involved. The moment a company detects a possible market niche and begins to exploit it, it begins to stop being niche, precisely because someone is already responding to what originated that niche: a need of the consumer that is not being met. And unless the company establishes a firm hold on this market, other players can jump into the fray and reduce its profitability.
What is a niche market?
Having established the preamble, let us now take a look at the main subject of the article – how to find a niche market. To that end, first we have to define what a niche market is. A niche market is any market having the following characteristics:
- It is made up of a small part of the collective market, whose individuals have an unmet need. It is important to emphasize that the market segment should not be too small, otherwise the niche will hardly be profitable.
- These individuals making up the niche have similar characteristics, tastes and needs.
- The need that these individuals share must be quite specific and to the meeting of that need, the segment must be willing to pay. This is important because sometimes there are sectors in a market with very specific needs but consumers in them are not willing to invest money towards the fulfillment of these needs.
- There are very few companies that can satisfy that need directly. If the possible market niche you have detected does not have any company (even a very small one) operating within it, it may be a sign that it is not viable.
To give an example, we see that society is becoming increasing aware of the quality of food that they eat. In particular, the ecological, sustainability and health impacts of the products that they buy. Furthermore, more and more people are having a greater sense of appreciation of local commerce and consumable products being produced in one’s own city, state or province. In consequence of these realities, a company may study a niche market on the basis of potential customers for organic and sustainable food products being produced in close proximity to them.
We have an idea now, but how can we be sure that the theorized niche market exists and is profitable?
Investigating the profitability of a niche market
You do not have to be quixotic to try to understand what the future may hold. The famous writer of science fiction novels, Jules Verne, was decades ahead of his time in many of his works. He imagined the submarine, the fax, among several other scientific advances that would only be realized after his death. Did he have a crystal ball? No. Julio Verne's trick was information. The writer consumed hours in the library each day, consulting all the information at hand, from newspapers and magazines of the time with the latest news, to books with avant-garde theories. From all that information, he extracted what interested him most. And sometimes, he guessed right.
So the key to detecting business opportunities among niche markets is to manage all the possible information available at hand – social media, news reports, specialized magazines, etc. Much of the information regarding our potential niche market is on the internet. You only need to be clear about what you are to look for:
- Sector or area to which you want to your company to be dedicated towards.
- Your financial capacity to undertake business in that sector.
- Demand, both current and future, for the products or services that you are going to offer to the market. This doesn’t have to exact but a well-worked estimate. This is the step where you can conduct a survey.
- Possible competitors that are already in the market or can enter after you.
Conclusion
Finding a segment of the market with an unmet need for which consumers are willing to pay enough is one of the dreams of any entrepreneur or business-owner. It is not easy, but using the aforementioned strategies you can to try to find your niche market, make a calculated entry, and prosper.