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Market niche: what it is and how to find the most profitable
Reading time: 8 minutes
Updated 29 January 2024

Market niche: what it is and how to find the most profitable

Whether you have chosen to sell a product or a service to your customers, you must remember that your new business, to achieve success, must necessarily have a market. Does not exist? Create your market niche!

The challenge is exciting (but also a winning one): you have to find the gap in the market and fill it in the best possible way, that is, offer something completely new or a better alternative to the products or services already available to your potential customers.

To do this, you must have a clear understanding of the meaning of a niche market and it is important that you know that the existence of a gap in the market does not automatically translate into the possibility of starting a winning business. Finding out why that gap exists is a fundamental step, which will avoid possible unpleasant surprises in the future. Only at that point, once you have found the right market niche, it will be time for you to understand how you can best fill the gap you managed to identify.

Proceeding in order is essential because you need to pay the right attention to each step.


Niche market: meaning

The attention dedicated to the meaning of market niche is neither rhetoric nor a pure exercise in style: a wrong interpretation of this term, in fact, risks totally compromising the success of your business, directing you towards completely wrong paths.

To an unwilling ear, for example, talking about a market niche could lead one to think of few customers and an unprofitable business; be careful because, as Richard Branson, founder of the Virgin group, would say,

“If you don’t have time for the little things, then you won’t have time for the big ones.”

The time has come, now, to finally clarify the definition of a market niche: this term refers to a particular market segment, growing and easily scalable, which has particular needs and desires, that make it different from the rest of the market.

A market niche can be more or less specific: each market niche, in fact, can theoretically be divided into further niches, with increasingly specific needs and preferences. The adverb “theoretically” is not used by chance: you must never forget, in fact, that your market niche must ensure sufficient demand for the sales of your product or service to be profitable.

Take this into account and avoid market niches that are too unknown (but also stay away from niches that are too “trivial”) when proceeding with market segmentation, one of the most useful strategies for identifying the most scalable market niche for your business.


How to find your niche

To identify a market gap and find the most profitable niche for you, it is essential to study what the market offers, but it is also important to draw on your personal interests and experiences. Operating in a niche that interests you will provide you with extra motivation to do your job better and will give you additional strength to be able to overcome any challenge that comes your way. Furthermore, your personal experiences can provide interesting insights to trace the needs of consumers who have not yet been satisfied by the market.

By now it will be clear to you that an unsatisfied consumer need results in an absence of products or services or, alternatively, in the presence on the market of resources that are considered inadequate and, therefore, can be improved.

In the event that you intend to start a local business, you can experience firsthand what competing companies already on the market offer (and, above all, do not offer) or you can carry out a survey among your potential customers. On the web, on the other hand, to find profitable market niches, it is possible to study the search volumes of certain keywords on Google and analyze the sub-categories already present on Amazon.

Segmenting the market, as mentioned, is one of the most effective ways to identify a market niche that is as profitable as possible. This operation consists in dividing consumers and potential customers into different subgroups, based on certain characteristics (geographical area, demographic profile, lifestyle and interests, behavior, etc.).

If you choose the geographical area to proceed with the segmentation of the market, your attention can fall on various aspects, such as (obviously) the geographical position, the population density and the language.

On the other hand, aspects such as age, gender, education and employment contribute to define the demographic profile.

The psychological aspect can also be decisive in the segmentation of the market and, consequently, in the choice of the most profitable market niche: as already mentioned, you can divide consumers based on their lifestyle, but also in reference to their opinions and to their values.

Finally, behavior: focus your attention on the benefits sought by your potential customers, but also on the purpose that guides them in using the product or service at the center of your analysis.

Focusing on consumers will also help you not to direct all your attention to a specific product or service: remember, in fact, that products or services can go out of style and become useless over time, while it is more rare for this to happen with a market niche and with its needs and desires.

At this point, however, it is appropriate to define even more clearly what distinguishes a good market niche from one that, on the other hand, you absolutely must avoid. The main criteria for identifying a good market niche are essentially 3:

  • must guarantee a good number of sales;
  • does not need constant and particularly intense customer support;
  • has high profit margins.

In addition to dwelling on these fundamental points, however, in the identification phase of your market niche you will also have to ask yourself further questions. Some of these may be obvious: what is the price of the products? How does the competition move?

Other questions, on the other hand, are less obvious: how loyal are the people who are part of the market niche to the brands? At the basis of this question there is a fairly elementary reasoning: a customer who is particularly loyal to a brand, when he needs to update his product or service, will in all likelihood turn to another resource of the same brand. For this reason, the advice for you is to focus, at least initially, on a niche in which consumers do not have a particular loyalty towards the brands already present, in order to avoid direct confrontation with already established and consolidated brands. Over time, then, the challenge you will have to win will be to retain your customers.

Then there are questions that, on the other hand, could blow you away at a first reading. An example: how heavy are the products you intend to sell? This question has a specific purpose, especially if you are about to start an online business that requires a lot of remote shipping: heavier products have, in fact, higher shipping costs. Don’t overlook these seemingly insignificant little details: these too can help you choose the right market niche for you.

Also remember to be flexible in your ideas: the first impression is not always the right one and you must be able to change your point of view and your beliefs quickly and quickly, in light of the new scenarios that will arise. Use your lateral thinking skills and investigate the reasons why there is a particular gap in the market: this is not always an opportunity to reach unsatisfied customers. In some cases, in fact, its existence could simply indicate insufficient market demand. Stay away from these market niches.


Market niches: examples

Up to this moment, the discourse has remained on a purely theoretical level. To clarify some concepts, it is now useful to proceed with some more practical examples.

A market niche is one that refers to left-handed people: about 10-12% of the population is. It is a market niche that does not refer to a specific product or service, but within which it is possible to explore different needs and desires, with a wide range of products or services specifically dedicated to them.

Market niches, as mentioned, can be more or less specific. Think pet owners: this is an interesting market niche, but it is very broad. Offering collars, leashes and kennels is only the obvious choice in this industry but it could put you in a risky position, forcing you to clash with big brands. To achieve success, in this case (but not only), the “secret” is to offer unique and original products, which respond to specific desires. A viable alternative, for example, could be to focus attention on pet owners who are looking for customized products with the image of their “4-legged friends”.

It is up to you to evaluate how deeply to push yourself in choosing your market niche. The risk, as already pointed out, is that of identifying a niche that is too specific, which does not ensure sufficient demand for your products.

The world does not live by desires alone: it is also important to know how to respond quickly, practically and safely to the problems of one’s customers. When you spot a new trend that could give rise to a niche, immediately take into consideration all the possible problems associated with it and think about how you could solve them.

Another example can make it clearer: in recent years, also thanks to the spread of platforms such as Airbnb, more and more people are renting out their homes. The practice of renting has an inherent problem: you need to be able to trust those who let you into your home. The birth of ad hoc devices that allow temporary access in a practical and safe way, even in the absence of the homeowner, has solved this problem, confirming the success of those who have had this happy intuition.


Profitable market niches

Now that you have a clearer idea of what a niche market is, it may be useful to get an overview of what, in general, are the best sectors to invest in. On a global level, in fact, in recent years, it is possible to identify some trends that have made some market niches particularly profitable.

An example above all is the area linked to environmental protection and sustainability. Think about vegetarian and vegan products, cruelty-free or eco-friendly ones: they were emerging market niches until recently, but now they are increasingly consolidated, thanks to the growing attention and demand from consumers. Remember to be creative: for any product used by a large part of the mass market, or almost, it is possible to think of a sustainable alternative.

The one that refers to weight loss, in principle, is another particularly profitable market niche. Also in this case, the choices towards which to orientate are many: it is possible to distinguish by gender or by age class, by area of the body in which to intervene and by type of product and service proposed.

Similarly, the more generic so-called “self improvement” sector is a particularly profitable niche and offers various ideas on which it is possible to build a business: think, for example, of the many online courses to improve self-esteem.

The challenge, for all market niches considered particularly profitable at the moment, is knowing how to promptly grasp the risk of market saturation: it is therefore necessary to carefully and continuously monitor new trends and intercept them at the right time.


Growing market niches in Italy

Technology is a particularly thriving market in Italy. The gaming sector, that is, the one that affects the entire universe of video game enthusiasts, is, specifically, a rapidly expanding market niche in recent years, even in our country. Gamers need high-performance products to perform at their best and therefore, in this field even more than in others, it is essential to evaluate what the competition offers and improve it, focusing in particular on the possibility of customizing the product.

Covid-19 has upset everyone’s everyday life, also revolutionizing the way we work. Even this phase of crisis can prove to be an opportunity for you: more and more people, even in Italy, have started working in smartworking and, in this way, have given life to a new market niche to explore, with products and services designed specifically for those who work remotely.

Another sector in which it could be profitable to invest is that which concerns finance and, in particular, the area that concerns “making money online”. The recent boom in cryptocurrencies, for example, can be a great opportunity for you to intercept new needs and desires and succeed in a growing market niche in Italy.

Nicola Zanetti

Founder B-PlanNow® | Startup mentor | Startup consulting & marketing strategist | Leading startup to scaleup | Private angel investor | Ecommerce Manager | Professional trainer | Book writer

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