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One of the first major decisions you’ll need to make as a business owner is the niche market you want to target. It’s tempting to target a broad audience. In extreme cases, some new business owners try to target everyone. But narrowing your focus can increase your relevance, minimize your competition, and ultimately guide you to better results.

The key to finding success with a niche marketing strategy is choosing the right niche. But what makes a niche, and by extension, your target audience, “good”? How do you choose the best fit for your company and your products?

Elements of a Valuable Niche Market

These are the most important elements of a valuable niche market:

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Look for High Consumer Relevance and Appeal

For starters, you need to make sure that your products and services have a high customer relevance and appeal. For example, if you’re selling skateboards, you’re probably not going to effectively appeal to octogenarians.

But if you’re selling retirement planning services, you’re probably not going to effectively appeal to teenagers. These are obvious examples, but you might be surprised to learn what some demographics prefer.

Choose a Niche Market with Minimal Competition

Niche markets are also valuable when they’re relatively free from competition. Of course, it’s certainly possible to enter a market rife with competition, as long as you differentiate yourself. But marketing, advertising, and sales are going to be much easier if you don’t have as many competitors to contend with.

Study the Strategic Potential of the Niche Market You’re Considering

How much strategic flexibility do you have within this niche market? Can you reach this market in many different ways? Is this a scalable niche? Moreover, once you achieve a critical amount of growth, can you transition to target a broader audience?

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Strategies to Choose a Better Niche Market for Your Business

Follow these strategies to choose a better niche market for your business:

1. Start with Open Brainstorming

Everything begins with open brainstorming. So take what you already know about your products and services and think about all the different types of people who might be interested in them.

For example, are there any niche markets you can immediately exclude from consideration? Are there some that seem promising? Try to include multiple team members in this discussion so you aren’t limited by your own biases and preconceived notions.

2. Rely on Secondary Sources

Once you have some ideas on paper, start using secondary sources to do demographic research. For example, research centers, the Census Bureau, and think tanks can all be great sources of information. There, you’ll learn more about how these demographics behave, how they make purchasing decisions, and how you can target them with effective products, messaging, and positioning.

3. Study the Competition in a Niche Market Closely

It’s also important to study your competition closely, from beginning to end. Which demographics are they targeting? How are they positioning their products?

This may inspire you to mimic their approach and target the same audience but it’s even more valuable to differentiate your brand and do something different. To find your niche market, look for audiences that your competitors aren’t targeting. Also, look for critical positioning strategies that your competitors aren’t using.

4. Conduct Your Own Research

Market research comes in many forms. You can conduct surveys to learn more about how your audience feels about specific topics. You can host focus groups to watch different people respond to your products and services in real time. Also, you can dig up statistics online to learn more about demographic behaviors. Through a combination of all these tactics, you should get to know your target market much better.

5. Partner with Experienced Professionals

Choosing a niche market is much easier when you have experienced professionals by your side. That’s why it’s valuable to work with a marketing agency or a marketing consultant. Instead of relying on your own assumptions and your own research, you can tap into a wealth of experience and, typically, see much better results.

6. Develop Customer Personas

Customer personas are like fictional characters who represent your target demographics. They’re excellent conceptual tools for better understanding how your target demographics think and behave—and communicating those concepts across different departments.

7. Challenge Your Assumptions

Throughout this process, try actively challenging your assumptions. Too many entrepreneurs and marketers fall into the trap of following their intuitions exclusively. It’s much better to choose a niche market and plan your marketing strategy based on objective, unbiased data.

8. Keep Gathering Data

Your research shouldn’t end just because you’ve settled on an initial market to target. Instead, you should commit yourself to continuously researching your market, your competition, and broader economic factors. The more data you gather and analyze, the more you can refine your conclusions. Therefore, the better you’ll be able to target your most valuable customers.

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You’ve Only Just Begun

Choosing a niche market is just the beginning. From there, you’ll need to revisit product development, refine your brand positioning, and start developing marketing and advertising strategies to reach your target demographics. It’s a lot of work, but it’s going to be much easier and much more effective once you have the fundamentals in place.

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