Before you start a business or if your are making a strategic plan for your existing business, the first thing to do is to understand your market and to find your niche there.
A niche is composed of a specific group of customers in the market, with similar needs, tastes and preferences, in which a limited and clearly defined range of products or services are sold.
Why is it necessary to find your market niche?
The reason is obvious. The market out there is huge and large and the customers are numerous, with their own diverse needs and wants, and with countless other businesses offering the same or similar products and services. On the other hand, the resources of your business – time, funds, staff and manpower, store spaces, equipment—are limited.
Therefore, you cannot efficiently and effectively serve all customers at a profit, in the same way that you cannot be everything to all people and be happy. Besides, no matter how big the market is, if the products and services that you are selling are not what your target customers need, it will still not result to a sale.
The secret is focus, focus and focus, and find your niche in the market. How to do it?
First, you must know your product or service—its characteristics, nature, qualities, and what it can do to the customers.
Second, you must know who the customers are that would need your product or service.
Knowing these two important factors will give you a clear picture of your business-products/services-market mix, and you can now proceed to find your niche.
In finding your niche, you can analyze the market based on the following:
1. By demography. This is done by looking into the profile and characteristics of your target market in relation to their age, gender, income level, educational background, religion, household income, size of the family, social class status, occupation or profession. The people belonging to this demographic classification have their own sets of needs and wants, tastes and preferences which are different and distinct from the other groups. For instance, the needs of the teenagers are different from those of the seniors, while the preferences of the ladies who are office girls are not the same as those of the stay-at home girls of the same age bracket.
2. By behavior. This is done by dividing the market based on their knowledge of the product or service, as well as their attitude, use, and response to the same product or service. Knowing the behavior of the target market will enable you to provide a kind of products and services that are responsive to your customers’ needs and wants.
3. By geography. This is done by selecting the market based on the location, e.g. cities, state, county, provinces, regions, and by looking at the economic growth and volume of business in each chosen area. Knowing the level of economic growth in the particular location will provide you with indicators of the size of the market, if it is growing rapidly, slowly, or none at all.
4. By psychographics. This is done by identifying the market based on lifestyles, culture, personality and values. Knowing the personality traits and lifestyles of the target customers will enable you to provide products and services that are responsive to their needs and preferences.
Once you have found your niche, the rest is up to you to manage your business in a competitive manner to achieve its objectives, the foremost of which is profit maximization.