For many small business owners, finding a niche is a daunting task. For many of us, our small businesses are a form of self-expression, and focusing on small business marketing forces us to answer two deceptively complicated questions. Who is our target audience? How are we meeting their needs?
If you’ve been reading this blog for a little while, you’ve probably seen the phrase “product-market fit” or PMF. Achieving PMF is very important because it means you are meeting your target audience’s needs with products that feel tailor-made for them. Once you achieve PMF, you can begin to specialize in high-PMF products and narrow down the scope of your marketing messages on the people who care the most. In other words, once you find a unique way to meet an existing need, you can begin to define your niche.
Clear as mud? That’s okay. In this post, I’ll be talking about what niches are, why they matter, and how you can find yours. Here is an outline:
Why Your Small Business Needs a Niche
Finding Your Niche
- Finding Your Niche
- Consumer Behavior & Your Niche
- Consumer Decisions & Your Niche
- Culture, Subculture, & Your Niche
- Perfectionist Niche
- Image-Conscious Niche
- Hedonist Niche
- Frugal Niche
- Novelty Seeker Niche
- Impulse Shopper Niche
- Simplicity Niche
Why Your Small Business Needs a Niche
Welcome to the Post-Network Era
To understand why niches are important, you need to understand a little bit of history. Between the 1950s and the mid-1980s, everyone lived in the network era. The vast majority of advertising – at least the way we remember – ran through three companies. They were ABC, CBS, and NBC. The television had to cater to very large audiences, so they didn’t have to focus on niches. ABC, CBS, and NBC needed to run programs that appealed to as many people as possible so they could take market share from one another.
Now yes, we always had papers, small businesses, and other forms of communication. However, the wide variety of media we have available to us – cable TV, the Internet, and so on – dramatically changed the advertising landscape. In order to hold someone’s attention, you could no longer share “good messages for most people.” You had to share “the perfect message for a specific subset of people.” This is the post-network era. It’s where we live now. We’re never going back.
What’s a Niche?
Because we live in a world of fractured, multi-channel media, commanding attention depends upon delivering the perfect message to the right person. If you like, you can think of this as Person-Message Fit instead of Product-Market Fit. You’ve found your niche when you’re able to make very specific products for very specific people with a very specific message.
Sound like pigeonholing? It is, to some extent. However, if you succeed, you can always scale up from there. Starting small makes it easier to succeed from the get-go and you can grow at a natural pace after you achieve a minimum level of market success.
Why Your Niche Matters
Because attention is the truly scarce resource in the post-network era, your messages have to be really appealing. “Everybody’s second choice” doesn’t work in 2019 unless you’re a politician (and even then, you’ll likely lose the primary by being “everybody’s second favorite”). Attention is hard to get and keep in a social media world saturated with banal posts (Instagramming your lunch, corporations trying to be cool on Twitter, etc.)
Even if it weren’t for the trouble with getting and keeping attention, finding a niche would still have other benefits as well. For one, your start-up budget tends to be lower if you’re making very specific sorts of products. This especially good if you’re starting a business for the first time. It’s not uncommon to fail for a few years until you figure out what you’re doing. By having a small niche and a small budget, you can fail fast, fail cheap, and keep going!
Small niches are also easier from a logistics standpoint too. This is an especially salient point if you’re running a one-person operation. When you find a high-PMF niche, you can keep selling to the same customers over and over again. You don’t have to spend time generating new leads all the time – you can keep working the same old ones.
Finding Your Niche
Finding Your Niche
I’m not going to sugarcoat it for you. Finding your niche is hard. You need a strong understanding of the industry you’re going into, consumer behavior and decision-making processes, and marketing in general. Furthermore, you need to realize that if you’re competing on the internet, you’re competing with the rest of the world. Globalization can be a game-changing force for better or worse in your business.
If you’re not sure where to even start, ask yourself a few questions and write down the answers.
- What obscure niches am I a part of? Why?
- What do I do with my spare time – hobbies and interests?
- If I could start any business – cost not a factor – what would it be?
- What marketable skills do I already have?
By assessing your skills an interests, you at least have a direction to go in. From there, you can imagine multiple different niches. Then you can Google them to see if other people would be interested in that niche.
Here’s where it gets really tricky. You’re very unlikely to find a profitable niche the first time. However, if you start with a niche in mind and really lean into it, you’ll receive feedback and you’ll have a chance to observe the way people react. Then you can pivot to a related niche. Rinse and repeat until you finally have a profitable niche. It can take years of hard work, but it’s the best method I know.
Consumer Behavior & Your Niche
Niches are based on people’s interests, and people’s interests based upon their needs. People are driven to take actions based on their needs – this is the core assumption we make when studying consumer behavior. To understand consumer behavior, and therefore find a profitable niche, you’ll need to be an avid people-watcher and a student of psychology, sociology, and behavioral economics. To be clear: the whole purpose of studying consumer behavior is to observe how and why people actually make purchasing decisions, as opposed to our expectations.
The diagram you see above is called Maslow’s Hierarchy of Needs. Our minds are problem-solving machines, and once we solve the problems at the base of the pyramid, we continue to work our way up. Your product needs to meet one or more of your audience’s needs.
Once you figure out exactly whose needs you’re addressing and which needs you’re meeting, you can try different things to see whether or not you’re doing a good job of that. you can refine your product until you meet the product-market fit of that very specific niche. Once the basic product is correct, meeting the needs of just the right audience, then you can focus on messaging. That is, getting people to buy your product.
Consumer Decisions & Your Niche
People are not perfectly rational decision makers, so even if your product is perfectly tailor-made to meet specific needs, you still need to convince people to buy it. The way you do this will ultimately depend on sending people messages that make them subconsciously think “this will meet my need.”
This is easier said than done because people tend to make decisions based on heuristics and not a clear-eyed evaluation of all facts at once. That’s no insult, by the way, I do myself! The simple fact is that our world demands so much of our attention that we have to take mental shortcuts in order to get through our day-to-day.
When it comes to consumer decision-making as it relates to your niche, you have five main objectives:
- Get your customers to realize that they have a need which you can address. In other words, raise awareness in places where folks interested in your niche would see.
- Make information available to those who seek it so they can make decisions.
- Study the actual behavior of your customers so you can make sure your niche is a) meeting their real need and b) that the message of “I can fix your problems” is coming through loud and clear.
- Use a clear call to action to convince people to purchase your product or try your service.
- Ensure that the post-purchase experience is good. If you’re focusing on a small niche and you intend to sell to the same customers more than once, this is especially important.
Culture, Subculture, & Your Niche
The subjects of culture and subculture could easily make up an entire post – and they probably will someday! What you need to understand for now is that by finding a small niche and seeking to fill specific needs, you will be focusing likely on a fraction of a subculture. That means you need to understand the values, beliefs, and assumptions that your customers come to you with. Read their communication online and try to understand how they work. Become a part of their communities and begin to learn what they value.
In an article on decision-making styles, I covered the same seven concepts that I am about to cover below. However, this time, I’m going to focus on how each decision-making style actually creates room for a unique niche that you can satisfy. Each decision-making style entails a different mentality that customers will bring – consciously or unconsciously – to the purchasing process. Let’s start with the perfectionist.
Perfectionists are trying to make the perfect bullseye decision. They hem and haw, thinking about everything that goes into the product and how they will use it. In other words, they are the rare rational customer.
If you want to appeal to perfectionists, you need to make an extremely high-quality product or provide a high-quality service. The entire experience needs to feel seamless. They will likely come to you with a lot of questions. You need to know how to answer them.
Oftentimes, mass-market products are just not that great. It’s a reality of having a quirky need and nobody around to adequately fill it. While perfectionists are tough to please, they can be very loyal shoppers once you win them over. Anything that’s billed as “bespoke” or “artisanal” is intended to win over perfectionists.
In the modern age, consumerism plays a really big role in the way we see ourselves. The philosopher Jean Baudrillard says that consumption is not just a product but “a piece of a ‘language’ that creates a sense of who we are…Our purchases reflect our innermost desires so that consumption is caught up with our psychological production of self.“
Bear with me – I know that bringing in a postmodern philosopher is an awfully heady thing to do. The point is really important and you can see it at work in anyone who is proud of their Mercedes or their Lexus. You can see in anyone who takes pride in purchasing from the farmer’s market instead of Walmart. For that matter, you can see it in anyone who purchases from Whole Foods (at a great cost premium) instead of Aldi (which has very comparable quality food because it’s basically a German Trader Joe’s).
The image-conscious person isn’t necessarily “rational” in the pursuit of the “best quality” product. They are meeting a desire to build a sense of self through consumption. This is really good for small businesses because people like supporting them. Purchasing from a small business makes people say “I am the kind of person who purchases items from small businesses.” This is not even getting into the specifics of your product, which can also signal classiness and style if done right.
The hedonist shopper just wants to have fun. They aren’t concerned with facts and figures, long-term quality, or anything else like that. For hedonists, decisions are made based on how fun the anticipated experience is going to be.
When you’re crafting your niche around hedonism, you need to understand that user experience is really important. It needs to be seamless and fun, and it can’t seem like work. Your product or service doesn’t have to be the most utilitarian one, just one that feels fun.
If you decide to pursue this particular niche, you need to do some research on what people find the most fun about your particular industry. You don’t want to come across as overly serious, so your branding will need to communicate a certain levity. When it comes time to test your product, you want to make sure that people are smiling and laughing when they use it.
This is precisely what it sounds like. Frugal shoppers are driven entirely by cost. I don’t think a small business should compete on cost 99% of the time. Here is a post I like from Marketing Donut that goes into more detail of why that is.
The frugal are driven by saving money. That could either mean upfront by buying the absolute cheapest thing that’s available, or a more sophisticated version where they buy for value-over-time. That is, they won’t buy the $20 shirt because they know it will tear up in two months. They’ll go the next step up because they know it will last. The former example, you want to avoid entirely unless your small business is positioned to make particular things very cheaply. The latter example, you may have a chance.
Novelty Seeker Niche
Novelty seekers are great for small businesses. They are the ones who are always looking to start something new. They are the innovators and the early adopters. They’re primarily motivated by staying on top of trends and by the love of exploration.
To appeal to novelty seekers, there are two things you can do. The first is that you can simply be brand new to them. Oftentimes, novelty seekers are a subset of people within a subculture who will try anything once – good or bad. Other times, novelty seekers are looking for trends because they always want to know what’s going to be next. To appeal to those sorts of novelty seekers, you’ll need to constantly be researching your industry online and figuring out what is going to be the next big thing.
That first subset – appealing to people who have never seen you before. That’s relatively easy. They are the “superbackers” on Kickstarter, the collectors, and so on. The second subset are trickier because figuring out what’s “trendy” in any given community is a difficult task. Google Trends and social media have made it easier, but it’s really easy to fail nonetheless and look like a tryhard business that wants to be cool but is painfully inept at it.
Impulse Shopper Niche
Impulse shoppers are also driven by novelty but in a different way than novelty seekers. Being picked up by an impulse shopper will ultimately come down to pricing, packaging, and distribution. You want to be seen and have a price that’s agreeable to somebody without them having to think twice. That’s the magic of the impulse shopper – they don’t think twice.
Impulse shoppers can be a valid niche if you’re trying to make something inexpensive. For example, I’ve noticed that board games priced at $19 or less tend to sell really well among the hobby communities. This is because spending less than $20 is a no-brainer for the sorts of people who collect 300 or more board games. They have little to lose, and for all they know, it might be a blast. Worst case scenario: it’s just decoration for their shelf.
Last but not least, our ever-growing consumer-driven society demands our attention all the time. We can’t fully understand messages because of how many messages are being lobbed at us anytime we walk into a mall or turn on the television. Many buyers end up confused and unable to make decisions. In a state of confusion, someone who speaks clearly and is able to break down complicated concepts is a godsend. Brands that seem simple and minimalistic become awfully appealing.
I love writing how-to guides for beginners because it’s a huge value add. All too often, complicated concepts are not explained well online, such as with marketing. Through channels like this blog, I try to break down these concepts into digestible pieces so that people can fully understand them without removing the complex elements that need to be understood.
If you enter into an industry that’s not user-friendly, this could be a great opportunity for you. You could bring wallflowers off the wall by creating an easy-to-use product. That can very easily become your niche, in the right circumstance.
Finding a niche is a difficult but necessary part of doing business in the modern age. To find the perfect niche, you need to understand your abilities and interests, as well as the needs of your target audience. Once you understand that, you’ll be able to comprehend their consumer behavior and decision-making process. That will allow you to speak their language and make sales!
With that, I have just one question for you. What’s a niche market that you’re part of and why does it appeal to you? Let me know in the comments below!