If you are in any sort of business where you sell a product, you need to know what a niche market is. Essentially, a niche market is which section of the market your product is focused on. The niche market will help determine things like product features, how much the product costs, and the product’s quality. There are five different market subsets that niche markets are usually based on. These are behavioral, psychographic, demographic, geographic, and firmographic. In order to answer the question of what is a niche market, examples and case studies might be of great help.
What Is a Niche Market: Examples of Behavioral Market Segments
Niche markets can be based on one market segment or they can be based on a combination of market segments. A behavioral market segment is, as it sounds, based on the behavior of the consumers in that market. People can be divided into groups based on how well they know a product, whether they like it or not, how likely they are to buy it, how they use the product, etc.
You essentially want to figure out the buying behaviors of your potential customers and use that to market to them. For example, say you are selling beard butter. When you research who it is that buys beard butter, you may find that it tends to be men in their 20s and 30s. You may also find that these men are willing to spend more money on higher quality products or that they tend to prefer products that are all-natural.
Additionally, you might see that most purchases of beard butter are made online. You could then use this buying behavior to determine how you make, price, and market your product. You know that you can charge more for the product so long as you use high-quality and all-natural ingredients.
You can also focus your efforts on selling the product online, as you know this is where you will most likely see the majority of your sales based on the buying behaviors of men in their 20s and 30s who buy beard butter. Creating a niche market based on behavior can be a bit advanced but once you figure out how to do it, you can really pinpoint some great ways to sell to your customers.
Geographic Market Segments
If you want an easier way to figure out a niche market and use it when selling your product, look at a geographic market segment. This kind of market segment is based on where people live. This can be as broad as the country they live in or as specific as a neighborhood or suburb of a city.
Understanding the needs of people based on their geographic location and the climate there is a great way to focus where you’ll market your product. People who live in Seattle need rain gear, boots, jackets, umbrellas, etc. If you are a children’s clothing company, the niche market of “people who live in Seattle that have children” is a good one to market to. If you wanted to get more specific, you could look at different areas of Seattle.
Wealthy people who live in Seattle and have children are going to have different wants and needs than middle-class people who live in Seattle and have children. You will want to either target one of these niche markets or have multiple products that can target both.
For example, you could have some budget-friendly jackets and boots and then also some high-end products that are more expensive. You know that either way, people in these niche markets are going to be likely to buy your products just because, by virtue of being in Seattle and having children, they are going to need children’s rain gear.
Demographic and Firmographic Segments
Many different things are included under demographic segmentation such as gender, race, age, income, occupation, how big one’s family is, nationality, and others. This is another simple way to find the niche market you want to target and sell to. Gender is one that people often use as a basis and then they go from there, combining other demographics or other types of market segmentation to find the niche market.
One example would be to start with women as the demographic segment. This is a very broad segment and you need more aspects to narrow down to your niche market. If you sell luxury makeup products, you would want to look at women with higher incomes. You can narrow this down further if you do research and find that women in their 30s buy the most luxury makeup.
Maybe you also find that single women buy more makeup than women in relationships. Using all this information together, you would come up with a niche market of “single women in their 30s who have high incomes”. Again, this is one of the easier types of market segment to use when looking for niche markets.
Another example of this would be to focus on middle-class, single-parent families with young children if you wanted to sell budget toys or products that make meal preparation faster or easier. This niche market is more likely to want your product and so you need to focus on them when marketing.
You may not have heard the term firmographic before. In some ways, firmographic segmentation is similar to demographic segmentation. The main difference is that when you are looking at firmographic segments, you’re looking at companies and not individual people. Someone who sells industrial supplies or employee training would want to look at firmographic segments when determining the niche market they want to market to.
Company size, number of employees, how long the company has been in business, what the company sells, etc. are all examples of things that are used to determine the firmographic segment a company falls into. To use employee training as an example: perhaps you sell management training courses to help companies better prepare employees for management positions or to increase the skills of existing managers.
In your research, you find that medium-sized companies who have been in business for at least 5 years are more likely to want manager training. You would then want to look at what those types of companies are willing to spend for said training and how they prefer to receive the training. If you only do in-person training classes, you would want your niche market to be “medium-sized companies who have been in business at least 5 years and who prefer in-person training over online training”.
Psychographic Segmentation
This type of segmentation is based on the personalities, lifestyles, opinions, interests, hobbies, and values of your potential customers. A health food company would want to use this type of segmentation to determine their niche market. People who are focused on health and exercise and who don’t believe in eating animal products or byproducts would be a good niche market for a vegan health food company.
Strict parents with a busy lifestyle who believe that their children should have limited time spent playing games on their phones would be a niche market for a company who made apps that locked a phone after a certain amount of time spent playing games. This can be a trickier type of segmentation to use but it is an effective one. People with strong opinions about GMOs have pushed companies toward making GMO-free products because they are a good niche market to sell to and they are willing to pay more for things marked GMO-free.
How Do I Figure out What Segments to Use for My Niche Market?
When conducting market research, you will most likely see some market segments crop up after you’ve done a study with potential customers. In the first stages of research, you might see who exactly it was that answered your request to take a survey. You could then use that information to do a more specific study with potential customers in order to further narrow down your niche market.
Maybe you found that when you put out an initial survey online about pillows, 75% of the people who responded were women or that 56% of them were people between the ages of 25 and 35. You could then do a study that targets those broader populations and asks a series of specific demographic, behavioral, geographic, and psychographic questions.
After analyzing your results, you then create your niche market. If your study shows that women with no children who spend a lot of time at home are more interested in purchasing the types of pillows you sell, you could create a niche market of “single women between the ages of 25 and 35 who have no children and don’t spend a lot of time away from home” and target them. It’s important to constantly be evaluating and reevaluating your niche market. The people who wanted your product five years ago may not be the same people who want it now.
Have a Focus and Sell More Products
At the end of the day, the reason companies target specific niche markets is because they want to be as successful as they can be at selling their product or service. Targeting specific groups of people is the best way to do this, as you already know based on your research that these groups of people are more likely to want to buy your product anyway. Using niche markets to determine how much your product costs, where to market it, how to market it, etc. is the best way to make sure you’re reaching out to the people you need to in order to sell your product.