All businesses want to make money, but unless you find a profitable market, you’ll struggle.
The answer isn’t as simple as you might think. You’re not just looking to sell things to rich people. Plenty of entrepreneurs have made a fortune by flogging products to the masses. Instead, you’re looking to build a market that will be with you for years to come and will faithfully buy your products.
In this post, we’re going to take a look at a question that all businesses must answer eventually: how to find and build a profitable niche. As you might suspect, the answers aren’t always common sense. Sometimes it takes real insight.
Here’s what to do.
Solve Specific Problems for People
A lot of companies will start their search for a market by focusing on the product or service that they are going to create. They spend a lot of time planning and building out their offering, testing, and auditing along the way.
Taking a product-centric approach to finding your market, however, is a bad idea. You spend all your time focusing on the thing that you want to sell instead of the audience you want to sell it to. This process means that you lose sight of the customer’s need and spend too much time concentrating on product issues only you will notice.
The key to building an incredibly profitable market is to home in on the factors that matter to customers. Product specifications are important, but they shouldn’t drive your decision-making. Utility should.
Start A Conversation in an Existing Market
A lot of people think that finding niches is all about looking for “a gap in the market.” Often, people who know very little about business take this approach in conversation. They’ll ask you what your unique selling point is or what you do differently from everyone else.
While this is a valid strategy for some enterprises, it is not something that the vast majority of people need to do. The majority of entrepreneurs hop on the back of an existing trend and do it better.
The question here, though, is how they do it better. Yes, they make better products, but a lot of their success comes from their ability to craft a narrative around what they’re doing. They create a conversation that makes people sit up and think – and then make the switch.
Dollar Shave Club and Harry’s Razors both did this. They pointed out that customers were paying too much for mainstream brands and that there was another way for people to get the shaving products they needed on the cheap.
Look at Who Is Being Successful in the Space
When it comes to marketing a product, you don’t always have to reinvent the wheel. There are probably already a lot of companies in your niche, and many of them will be making money.
Your task is to find out where all the money is going. Which products and services are driving it? What is it that customers want ultimately?
Following the money can provide you with enormous insights into where you should direct your effort. You may discover that consumers want a very particular type of product that you don’t quite offer yet.
Put Yourself in the Shoes of an Alien Visiting Earth
After living on planet Earth for twenty or thirty years, you eventually adapt to it. Over time, the things that you once thought of an inconvenience become accepted, and you move on with your life.
There’s a lot about the modern world that we take for granted, but shouldn’t. An alien visitor certainly wouldn’t ignore it. They’d flag it up as a problem.
Some entrepreneurs are wired to see what’s missing in their environment. Others, however, adapt, and then never notice the nagging problem that is dragging their life down until somebody invents the solution.
As an entrepreneur, you need to think like an alien. You need to be the person who invents the intelligent solution to life’s little foibles. That’s the way to build a killer niche.
Attract the Most Profitable Customers
Building a product and selling it isn’t sufficient to create a profitable business. You also need to create a money-making pipeline – something that will allow you to remain profitable over the long-term.
How do you do that?
One way to do it is to build a subscription model – getting customers to make small monthly payments for services they enjoy. Apple, Microsoft, and Netflix all do this to keep their coffers full, and you should too.
Another way to do it is to create compelling sales funnels. It would help if you had strategies that attract customers to your business and get them to hand over their money – no questions asked.
You can bear in mind the 80/20 rule – the fact that 20 percent of your customers will generate 80 percent of the profits. It makes sense to target your marketing efforts at the top 20 percent of customers so that you can entice them further and get them to buy more products.
Do Your Homework
Finding a niche is also about being meticulous in your research.
Markets only develop in response to a need. Knowing what that particular need is, is part and parcel of developing a sufficient demand for your products and services.
If you understand a trend and can see how it might evolve, you’re in a solid position indeed. Don’t assume that everyone else in your sector knows what’s going on. Ask your peers questions about their perceptions of a particular dynamic and assess their thinking. At the very least, you’ll learn something, and you might get a sense that you’re way ahead of the game.
You should also research things like “buying triggers.” What are the circumstances under which people are willing to stump up the money for your product?
If possible, look for intersecting trends – these tend to be even more profitable. Combine consumer tastes, technology, and the legal environment to come up with something completely novel.