Choosing a Profitable Niche for Your Product Business

If you are new to owning a business, the most common problem you will face is not knowing who your target audience is. Many business owners try to appeal to a large audience by generalizing their products or services. Their strategy is to appeal to a larger audience to increase sales, but this isn’t a good strategy. It works against your business to do such a thing.

You want to offer products and services to a niche market. And the more niche down your audience, the better. It is much easier to sell to a small audience looking for your specific offering, and a lot cheaper in terms of advertising and marketing costs, than to reach a broader audience who aren’t looking for anything in particular. A contractor looking for software for his construction company is more willing to work with a consultant specializing in SAAS products for real estate and construction than a company making generic software for twenty industries. The contractor is willing to pay more because of the product’s perceived value. The contractor believes the construction consulting company understands his business model, needs, and wants. This message is conveyed in the advertisements and marketing material; by simply stating the known problems of that industry.

The first step to defining your niche market, list your current target audience. Who is currently purchasing your products or services? Who do you want to purchase your products or services? Next, ask yourself why. Why are you targeting those groups of people? I counseled a business owner who thought she needed to sell to the top three percent of affluent households in the Atlanta metropolitan area. I asked her why she believed this. Her answer was, “Because they can afford it.” Her business sold barware and wine accessories. Surely, people who earned much less than the top three percent of affluent households in metro Atlanta would find value in her products. Ask who would benefit the most from my products or services. Often, the people you want to sell to aren’t the best fit for what you are offering. Never pick an audience to sell to just because of money or status if it doesn’t make sense; if you offer estate planning services to people with an annual income of forty million or more, money matters, and you cannot overlook this part. This wasn’t the case for the woman selling barware and wine accessories.

Focus on narrowing down the main benefits of your offer. What results are people expecting? Who would benefit the most from your offering? All of these questions will help you develop a niche market. Here is an example. I will use the barware and wine accessory business. The benefit of the product is to entertain guests at your home. To make enjoying wine and mixed drinks at home with ease. Customers expect sturdy glasses and other accessories that make it easy to serve drinks to party-goers or for themselves. All of this information points to people who consume wine and mixed drinks regularly at home, and those who entertain guests at their homes often are the best customers to focus on. These people are now in our niche market.
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Now take that new information and add it to your target audience section of the business plan. Rewrite your sales and marketing plan, marketing material, social media content, product/service descriptions, and website copy to reflect this new niche audience. Include their specific pain points and how your business is the solution. Focus only on that audience. With time you will generate better quality leads that will convert into sales, increasing revenue for your business.

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