How to Choose Your Niche

How to Choose Your Niche

As an entrepreneur and/or small business owner, one of the decisions you make when starting your business is which area of the market is going to be your niche. In order to choose your niche ask yourself, “where in the market will my products or services fit?” Has a new market been created, because of changes in technology or society, which has a potential demand that is not being met? Once you have answered these questions, you have chosen your niche.

In your niche, you will find consumers or clients with shared characteristics, and they make up your market segment(s). An example of a niche (area of the market) may be where small business owners and/or entrepreneurs are; while the segments may be coaches, authors, internet marketers, solo law firm, etc within this niche (area). The factors (characteristics) that determine market segments are: 1) geographic, 2) demographic, 3) behavioral, and 4) psychographic (attitudinal).

Geographic segments are created as a result of segmenting markets by geography. Depending on what your products are, they may be used in one region and not another; for example, snow skis will sell better in Denver, Colorado rather than in Phoenix, Arizona. However, if you offer services, segmenting your market by geography may not be necessary; especially, in today’s global market.

Demographics are also used to segment markets. They are the statistical characteristics of the market, which include sex, age, ethnicity, education, occupation, income, size of company and any other factors that can be quantified.

Behavioral segmentation focuses on consumers’ or clients’ purchasing behavior; whereas, geographic and demographics provide information on the market. Purchasing behavior is based on when consumers buy or use products or services, what benefits are they looking for, how much they use, and what type of user are they; for example, loyal user; semi-loyal user; will not purchase unless it is discounted; are aware that product exists, but haven’t brought into the advertising message; have tried the services, but don’t like them; or will purchase at full price if there are perceived superior attributes, however, persuasive advertising can persuade the user to switch to another brand or company with similar superior attributes.

Lastly, markets are segmented based on people’s values, attitudes, personalities, and lifestyles, also known as psychographic or attitudinal segmentation.

An advertiser’s and/or marketer’s job is to create advertising messages and marketing strategies based on these factors. It is ironic how people are more alike than different. The aforementioned factors will determine how a group of people will purchase your products and/or services. We tend to be creatures of habit, which causes us to be “sitting ducks” for advertisers and marketers. We leave clues, based on our needs, wants, and mental files, that tell where we live, how we shop, what we buy, and how we spend our leisure time. The same holds true for the market segment(s) you choose to target with your products and/or services. They will have similar needs, wants, behave in similar ways or operate the same type of business.

In the broad market, there is an area or subset where your products and/or services will fit (niche), as well as a group of consumers or clients (market segment) within that niche (area in the market) who can use your products/or services. As an entrepreneur and/or small business owner with a limited advertising and marketing budget, it is important to choose a niche, and then select a market segment(s) to which you can offer your products and/or services.