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GuidesMarket researchWhat is a niche market? Understand the basics

What is a niche market? Understand the basics

Last updated

19 December 2023

Author

Dovetail Editorial Team

Reviewed by

Hugh Good

In the marketing and business worlds, you’ll frequently hear the term “niche market.” It’s a way of targeting your marketing and products to smaller groups of people. 

Why would you want to focus on selling to fewer people? Let’s dive into niche market advantages, examples, and why it’s a valuable business strategy. 

What is a niche market?

A niche market is any group of customers that shares certain qualities. It’s typically a more focused, smaller segment.

A niche could be based on the target customers’ age, gender, location, profession, or interests. 

The opposite of a niche market is a general or mass market. The mass market doesn't necessarily include everyone, but it encompasses a relatively large segment of the population. 

For example, big box stores, fast food restaurants, and supermarkets all target the ‘mass market.’ Conversely, a niche market focuses on a smaller group of customers. These may include boutique furniture stores, vegan restaurants, and world food stores. 

Niches may be large or small. For example, pet owners are a very large niche, while saltwater aquariums are a much smaller subset of the pet niche. 

What are niche market advantages?

Niche markets can offer businesses several benefits: 

Allows for economical marketing

Marketing to a large audience can be expensive. Large companies that advertise on television or in mainstream magazines need to afford to target the mass market segment through this approach.  

Niche marketing lets smaller businesses get more bang for their limited advertising dollars. Online advertising with pay-per-click (PPC) services such as Google Ads and Facebook Ads illustrate this. 

PPC advertising uses keywords, which range from highly competitive to less competitive. 

Niche marketing means businesses can often rely on lower-cost, low-competition keywords to generate traffic and engagement. 

Less competitive than mass markets

One of the defining characteristics of niche markets is that they are less competitive than mass markets. 

In some cases, competition may be minimal or even non-existent. Instances include introducing a new product type or starting a service in an extremely narrow niche.

On the other hand, businesses that target tiny niches must build brand awareness and educate potential customers about their products. 

There’s also the issue of having a smaller pool of target customers, so companies need to generate more revenue per customer to make up for fewer customers.

Supports word-of-mouth marketing

Small and mid-sized businesses depend on social proof like referrals, reviews, and personal recommendations from friends and family members. 

When you focus on a niche effectively, you can generate social proof without extensive advertising. 

At the grassroots level, people respond better to the opinions of people they know and trust versus advertising and other paid marketing tactics. 

Online reviews are an especially potent form of social proof. According to Gartner, 86% of customers consider verified reviews critical to their purchasing decisions. 

Customers of niche products can be very enthusiastic, so they’re good candidates to leave reviews.

Allows for more personalized marketing

One advantage of marketing niche products is boosting brand loyalty by providing more personalized attention to customers and prospects. 

You can devote more time to building customer relationships, like responding personally to emails and social media posts. Just be careful not to get into any heated arguments over your products—you don’t want to go viral for the wrong reason. 

Examples of niche markets

Here are some examples of niche markets: 

Green and environmentally friendly consumers

As concern over environmental issues mounts, there’s a growing market for conscious, green, and environmentally friendly products. 

Examples include:

  • Sustainable clothing

  • Eco-friendly cleaning products

  • Residential renewable energy, like solar panels

  • Buying locally 

  • ‘Green’ pet products

Pet owners

Pet owners represent a large niche that’s projected to get even bigger: Bloomberg predicts the global pet industry will reach $30 billion by 2030. 

Because of its breadth and scale, businesses may have more success targeting smaller sub-niches within the pet sector rather than trying to build a product for mass appeal. 

For example, they may target:

  • Specific types of pets, such as dogs, cats, fish, and horses

  • More specialized types of pet food, such as raw, insect-based, organic, or vegan

  • Unique pet accessories, such as clothing, toys, and cat/dog houses

  • Specialized products and services for training animals

LGBTQ+ consumers

The LGBTQ+ community is a growing sector. According to US Census data, it’s the nation's fastest-growing minority, with close to $1.4 trillion in buying power. 

Products and services to target this niche include: 

  • Fashion and accessories

  • Entertainment

  • LGBTQ+-friendly services in the hospitality industry

  • Home decor

Travel

Travel continues to be a large niche that often overlaps with others. 

After a pandemic-induced dip, travel spending has increased since 2021. The US Travel Association reports that air travel was up by 12% compared to a year ago. 

Many products, services, and sub-niches can reach all kinds of travelers, such as: 

  • Travelers interested in sustainability 

  • Seniors

  • LGBTQ+ travelers

  • Digital nomads

  • Luxury travelers

  • Budget travelers

  • People interested in cruises

Gaming

Gaming is another sector with millions of passionate fans who spend freely on games and accessories. 

According to Grand View Research, the global video gaming market was worth $217 billion in 2022, and it’s projected to grow more than 13% annually until 2030. 

As with most niches, there are numerous sub-niches within gaming, like: 

  • Action

  • Fantasy

  • Fighting

  • FPS (first-person shooter)

  • Platformer

  • RPG (role-playing) 

  • Simulation

  • Word and puzzle

In addition to buying games, gamers also purchase real-life and in-game accessories. 

RPGs like World of Warcraft and Second Life encourage players to purchase in-game items like weapons and clothing. And die-hard fans purchase figurines, t-shirts, and limited collector editions.

Homeowners

Homeowners have a broad spectrum of needs and preferences.

These products and services are useful for homeowners, renters, and property managers:

  • Furniture and home decor

  • Yard and garden products

  • Indoor and outdoor lighting

  • Home security, including cameras, alarms, and security lighting

  • Window coverings, such as curtains, blinds, and shades

  • Insurance, like home insurance, renter’s insurance, and earthquake insurance

Examples of brands selling to niche markets

The following are some examples of companies that have excelled at reaching a niche market.

Lefty's: Products for left-handed people

As the name suggests, Lefty's specializes in products for left-handed people. This is a significant yet often overlooked market, making up a little more than 10% of the population. 

Lefty's sells left-handed products online and from its San Francisco store, including clothing, tools, utensils, office supplies, and more. 

Aside from providing convenient products, Lefty's has a loyal following—it's one of the few businesses that caters exclusively to this market.

Ruffwear: Outdoor dog gear

Increasingly, dog owners like to take their pets with them everywhere, on hikes, bike rides, boating adventures, and other outdoor activities. 

Ruffwear sells clothing, harnesses, safety lights, and other products to make it safer and more convenient for dog owners to take their pets on adventures. 

With over 400,000 followers on Instagram, Ruffwear is tapping into a popular niche that isn't well served by other businesses. 

The company has effectively combined two popular niches: Pets and outdoor gear. The principle of blending distinct niches in creative ways is something many businesses can apply.

Lush: Natural and handmade body care products

Lush taps into the growing market of consumers seeking natural and ethical beauty and body care products. Statista projects that the organic personal care products market will surpass $11 billion by 2025.  

Lush offers handmade soaps, body care, skin, and hair products for people seeking alternatives to the typical mass-produced items in this industry. They also carry many holiday and seasonal products, which quickly go viral. 

Lush has put its stamp on the very competitive beauty sector by offering unique products that larger companies cannot duplicate.

Kirrin Finch: Non-binary and LGBTQ-friendly apparel

Kirrin Finch makes clothing and accessories for the flourishing LGBTQ+ sector. 

Their mission statement expresses the need to challenge traditional norms regarding menswear and womenswear. Creating a unique selection of gender-neutral apparel has allowed the company to reach a large, unserved market. 

Glorious: Gear for gamers

The gaming niche is constantly growing and evolving. Glorious has leveraged this niche by offering a variety of accessories and gear to accommodate many types of gamers. 

Their most popular products include gaming mousepads, lightweight gaming mice, and hot-swap keyboards that allow players to change keyboard switches. 

They also offer specialized accessories and apparel, such as water bottles, hoodies, beanies, and t-shirts. 

How to reach a niche market

You’ve found a niche market, but how do you actually reach it? 

Niche down from broader categories

Many niche markets are vast and competitive. Smaller companies can carve out a space by "niching down" and finding a specialty or sub-niche within a broader niche. 

Online dating is a large niche with many sub-categories, such as dating for seniors, LGBTQ+, fitness-minded singles, and religious-based dating.

Identify keywords for your niche market

Keywords are an essential part of online marketing, whether you're creating paid ads or trying to rank content such as blog posts or videos in the search engines. 

Keyword research is also useful for gauging the popularity of products and niches. 

By searching for long-tail keywords, you can find less competitive terms, cheaper for PPC campaigns, and easier to rank for. 

Research on social media

Social media provides a rich resource for finding niches and discovering what people are talking about and buying:

  • Large groups on Facebook can inform you about the size of a market. 

  • Pinterest can show trending images and videos: Many pins are specific products. 

  • See what large influencer accounts on Twitter and Instagram are discussing. 

  • Check out hashtags across all platforms. 

Study the competition

Unless you’re introducing a new product or service, you’ll have competition. Competitor research lets you see the size, popularity, and marketing strategy of other brands in your niche. 

Carrying out competitor research is easy:

  • Explore competitors' websites. 

  • Note their copy, visual style, and overall marketing approach.

  • Take note of their prices.

  • Read their customer reviews.

  • Browse their social media accounts.

  • Check out their videos on YouTube or TikTok.

  • See if they’re advertising on Google, Facebook, or elsewhere.

Explore fast-growing occupations

Studying data on jobs and fast-growing careers can also yield benefits for niche marketing. 

Let’s consider the latest list of fastest-growing occupations published by the US Bureau of Labor Statistics. Topping the list is wind turbine service technicians, which illustrates the popularity of the renewable energy sector. 

Gather statistical data

Collect data on all aspects of your niche market, which includes:

  • Size of the market, including projections for the future

  • Competitor data on the leading brands in your niche

  • The popularity of keywords and the bidding cost on PPC platforms

  • Study industry reports

FAQs

What are the features of niche marketing?

  • Targets customers based on demographics, interests, spending power, or other criteria 

  • Unlike mass marketing, niche marketing isn’t aimed at everyone

  • Niche marketers must focus on setting themselves apart and emphasizing their unique value proposition (UVP)

What is the difference between a target market and a niche?

A target market is about people, while a niche refers to products and services. 

Your target market comprises your potential customers—the people you're marketing to. 

A niche is the field or sector you’re serving. 

Is Apple a niche brand?

People often ask whether certain brands cater to a mass or niche market. 

Apple is an excellent example because it began as a niche hardware and later software company, targeting designers and higher-end consumers. 

Arguably, as it evolved into one of the largest brands in the world, it became a mass-market company.

Is Amazon a niche brand?

Amazon has the qualities of a mass-market company and a niche marketing brand. 

When it only sold books, it tapped into the new niche of online bookselling. However, Amazon now sells almost everything, making it a mass-market company. 

However, it still employs niche marketing by targeting specific categories. 

Apple, Amazon, and other companies show that the line dividing niche and mass marketing isn't always clear. 

What are the criticisms of niche markets? 

There are a few potential drawbacks to niche marketing. If the niche is small, your potential growth is limited. If it's a new market, educating your audience is the main challenge.

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