23 September 2014

Defining your niche market

Here's how defining your niche can can help you to become the big fish in a small pond, reducing competition and differentiating your business from others

There is competition in every business sector nowadays, particularly given the increase in new businesses and freelancers over the last few years. So how can you ensure your business stands out? It’s all about defining and developing your niche.

What is a niche?

In business terms, a niche is a subset of the market, where you specialise your products or services for a particular type of customer. This often means you’re targeting a smaller customer base than if you were trying to sell to everyone, but instead of limiting your sales, it can actually improve them. It makes it easier for you to sell to your customers and for them to find you. Small businesses often benefit from becoming niche providers because they’re less likely to be competing with larger multinational companies and are able to build up a loyal customer base.

While having a niche is important, you also need to make sure that your customer group is large enough to be able to support your business.  For example, if you’re only likely to get a few sales a month from the group, your niche may be a little too specific – unless your products are very expensive.

How to determine your niche

In many cases, a business is started by someone with a specific need who can’t find what they want in the existing market. To help you narrow your market, think about:

  • Who your customers are and who your ideal ones would be. If you already have a business, do you have a particular type of customer e.g. women or a certain age group or location? You may want to focus on your most profitable customers, such as repeat customers or those who buy your most expensive products. Do they have anything in common or an unmet need that you can fulfil?
  • How you can focus your product or service. Is it a specific so that it appeals to a particular audience segment? Using the example of Charley Chau in our case studies below, their products are specifically for dog owners, which is still a large market, but they have narrowed this down, by focusing on luxury dog bedding.
  • Look at your competitors. While differentiating your product is slightly different to finding your niche, both are important if you want your business to be a success. Differentiating your business involves comparing it to your competitors’ and working out what your unique selling points are. You might have specific area of knowledge or product that innovative product to set you apart. This process can help you to spot gaps in the market and you could then adapt your business to suit that market and fulfil their needs.

Customer case studies

Charley Chau

Charley Chau was formed when owner Christine wasn’t happy with the quality of dog beds available, so decided to make her own. This led to requests from friends and a business with her sister Jenny was born. Their product combined two of their passions – interior design and dogs, filling a gap in the market for good looking, quality dog beds. Their company now has deals with Ocado and Not on the High Street and the duo were shortlisted for Entrepreneurs of the Year in the Fusion Awards earlier on this year.  

The Longbow Shop

This business sells traditional wooden archery bows and was founded because one of the company directors, Jason Powell, found it difficult to find wooden bows. Most archery stores focused on steel or aluminium bows, so the company decided to focus on traditionally made, wooden archery bows. There is certainly a market for it – the business started out as an online store, expanded to include a physical shop (in our Price Street Business Centre) and last year the company doubled the size of its unit to allow for extra stock and room to work.