Parux, formerly Alliance Systems, launches a new brand under new ownership.
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Ken Mocabee
Written By
Ken Mocabee
Published On
November 11th, 2021
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Finding Your Niche

Woman Showing Business Growth

A niche market is a segment of a larger market that has unique characteristics such as shared interests, values and needs. A lot of people equate a niche market as a small market, and some of that is true. By definition, it is a segment of a larger market. However, there are some distinct advantages for finding a niche market that the startup founder should recognize and potentially take advantage of.

Of course, founders often dream of building that unicorn that scales quickly to a multi billion-dollar valuation in a few years. It's hard to not think like that, but the reality is that for every unicorn, there are many thousands of failed startups that never get that kind of traction.

Founders should think seriously about niche markets for a bunch of reasons, which we'll explore in this post.

 

Niche - Competition

Less Competition

Large brands in big markets already have amazing traction and user bases, and cracking into that is impossible without throwing huge resources at it, which is far beyond the reach of most startups. Creating a great new video sharing service won't derail YouTube even if it is unique, so spending your time building that will be folly.

But let's say you do crack into a big market and get some traction on a cool product no one thought of. Do you really want the likes of Google, Pinterest, or Microsoft on their radar screens? The big dogs can crush you in a heartbeat with a new product, or just a new service that knocks off yours.

But a smaller segment of a larger market can help you fly under the radar. A market size of 10 million users might sound big to you, but to Google, not so much. And even if you target a larger mid-sized market that has lot of players already, you'll struggle to cut through the noise.

 

Niche - Reach

Easier to Reach

Before the internet, reaching niche markets was a lot harder and costly. Now, every niche is a community that tells you exactly who they are through social media and other websites that cater to those users.

Huge markets that get a lot of attention typically have a lot of competition too. Even if you have a new spin that you are sure beats the competition, the difficulty and cost of getting that word out makes it tough.

Just Google anything that has a massive market, and the competition for both organic search ranking and ads is also massive. Without serious PR and marketing efforts, the hurdles of cracking that market are enormous.

For example, let's say you have discovered something you think Airbnb is missing in their business model. You might be right, but Airbnb has major competitors like VRBO, and dozens of other well-funded, serious vacation rental sites that are nipping at their heels. Cracking into that market will be impossible without a marketing budget of tens of millions.

However, there are a number of successful brands in niche markets within the property and vacation rental market. Pets Pyjamas targets pet owners. Sawday's has curated, inspected high-end properties in the UK. Kid and Coe makes traveling with kids easy and fun. Skiyodl has properties in the mountains that cater to skiers and mountain enthusiasts. And there are lots of others such as gay-friendly, culinary / wine, and glamping.

And connecting with those groups is a lot easier than “everyone who might take a vacation”, which is close to everyone, and are constantly being bombarded. Social media allows you to target those groups very closely for campaigns, and there are sites that cater to them that are great advertising venues and places where you can blog about those experiences.

 

Niche - Loyalty

Building Brand Loyalty

People love it when someone addresses their needs, wants and pain points directly, and will reward a brand with exceptional loyalty. And finding a niche market that is underserved, or not served at all, can garner you a loyal following.

Building authentic connections with the communities you serve will be important. You can't just say you are going to meet their needs and when you don't, you can't expect to win their loyalty. You have to deliver on your brand promise.

Promise Gif

So, take the time to know what your market wants, and then make sure you serve it well.

Also, communities talk and share information about sources and brands that they like and that serve their needs. Nothing is more powerful than word-of-mouth marketing!

 

Niche - Profits

Less Competition = Higher Profits

Getting traction in huge markets is not only expensive for marketing and advertising, but often there are competitive pressures on pricing that impacts profitability. With sometimes dozens of competitors going after the same customer, they can shop on price. Brands that are spending big on customer acquisition and having to keep prices low can result in a collapse of a viable business model.

 

Niche - New Markets

Leverage Your Success with New Niche Markets

Successful niche market brands are often able to leverage what they have done to get into other niche markets. It's very common to see a niche brand that has several similar sister brands or product lines that serve other niche markets.

For example, Lululemon's target niche market is women's yoga and athleticwear. In 2015 they made some small forays into men's athleticwear, and by 2019, they started marketing to men aggressively growing that segment of their business which is steadily growing.

Challenges

Not all niche markets present the same opportunity, and there are some caveats you should think about before pursuing a specific niche market. Here are a few things to be aware of.

Niche market too small

Growth can be a problem if your niche is too small. If you pick a niche market with a very small number of people, you'll have to sell to a very high percentage to be viable. Expanding to serve other niche markets is a potential solution but there are no guarantees you can pull that off successfully.

Wrong demographic

Be careful not to make the mistake of selling products or services to a market that looks to be correct, but might not be because of things like disposable income, or other factors that could limit your traction. Another issue is marketing to a shrinking segment, which might be OK now, but in 5 or 10 years might be far smaller.

Attract competition

Once others see your success, you can be sure that others will be eyeing that same previously underserved market you went after. You can wind up with multiple competitors fighting over a smaller segment of a market.

Marketing challenges

Not all underserved niche markets fit into a definable community to which you can easily market. This can make marketing and engagement more difficult and costly.

Do Your Homework

If you follow our blogs, you know we talk a lot about Design Thinking principles and how having empathy for your customer is key. If you are going to sell to a niche market, it's crucial to know what makes them tick, what their pain points are, and what motivates them. Do your homework!

Summary

Finding a great niche market can be an extremely successful strategy. If done well, you can build a loyal following that will resist competitive forces. But do your homework, and if you do enter that market, do it right.

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