How To Pick A Niche


A marketing professor asked his students, “If you were going to open a hotdog stand, and you could only have one advantage over your competitors . . . which would it be . . . ?” 

“Location! ….Quality! …. Low prices! ….Best taste!” The students kept going until eventually they had run out of answers. 

They looked at each other waiting for the professor to speak. The room finally fell quiet.

The professor smiled and replied, “A starving crowd.”

You could have the worst hot dogs, terrible prices, and be in a terrible location, but if you’re the only hot dog stand in town and the local college football game breaks out, you’re going to sell out. That’s the value of a starving crowd. (Taken from Alex Hormozi)

I have heard this analogy told using a variety of different businesses, the ‘hot dog stand’ obviously isn’t the important component of the story. It is understanding how a strong market should be one of the leading factors in choosing your niche and positioning. 

I want to cover the 4 components that signify a strong market, but first let’s cover the difference between a strong trending market and weak shrinking market and how that affects your ability to succeed and grow.

When developing a positioning strategy, differentiation and competition are often the first two areas which we analyse in order to gain insight into ensuring we are able to find gaps in the market where we could be more impactful, and not seen as just another ‘me-too’ commodity product in a sea of many. 

However, spending time analysing a market to ensure we are different is wasteful if the market itself is a dud. Our ability to differentiate ourselves and understand competition is useful when we are in a market that is in need of new products and services. 

Growth for a business, product or service can be almost impossible in a market that is saturated, has no need for solutions, does not have any budget to spend or is very difficult to market to. 

Think of trying to market new products or services over the years to companies like Blockbuster, Borders, Gaming Arcades and Newspapers all while their market is shrinking and they are going bust…good luck! It wouldn’t matter how innovative your ideas were, how differentiated your products were, or how well you could find gaps in the market.

Alternatively business growth in a trending market where there is huge demand and plenty of money is the complete opposite situation. These people and companies are in need of new solutions that solve their current problems. The demand is greater than the supply and they are open to becoming loyal customers to the brand that understands and aligns best with their values.

For this reason an important component of good positioning is understanding trends and how to find a good market. Leveraging trends will make your life much easier. If being in a bad market is like trying to push a boulder up a hill, then being in a good market is the equivalent of already being at the top of the hill and watching the boulder roll all by itself.

Don’t believe me? Think of producers of toilet paper or masks at the start of the COVID pandemic. The market was so desperate for what they were offering that there were no sales pitches or no negotiating on price. There was just a ‘starving crowd’ that were in need of a solution, had money to spend to solve it, were easy to market to, and were growing more desperate by the day.

I will mention that the one caveat here for toilet paper and face masks is that the demand would be relatively short lived. When looking for good markets we want to recognise the difference between fads and trends. Fads are “a style, activity, or interest that is very popular for a short period of time.” Trends on the other hand are “a general development or change in a situation or in the way that people are behaving.” 

Fad Vs Trend Graph

Think of a fad as fidget spinners, and a trend as blockchain technology. We want to avoid fads if we are interested in growing and developing long term success. We want to identify trends that can help compound our efforts and set us up for consistent growth. 

How do we do that? How do we find trending markets? We use 4 easy criteria in order to assess if the market is the right choice, or best to be avoided. 

The first criteria is if there are currently customers that are not having their needs met, referred to by Marty Neumeier as the “unserved tribe”. These are customers that cannot find a solution on the market to their specific need. This unmet demand is essential to choosing a market correctly. If there is no demand, no problem and therefore no pain then we are better off moving on and finding a customer that is in need of your products or services elsewhere.

Next, are they easy to market to? Can we target them and get their attention in a targeted and cost effective way? Are there lists of prospective customers that we can buy or get access to? Each of these are usually a good indication as to whether or not there is the demand we believe there is. If no-one has gone to the effort of building lists, or developing marketing solutions for reaching out to these prospects before us then you are either very early or have miscalculated the market. 

The third criteria is to ensure they can actually afford our products or services. Like with the example provided earlier, trying to sell a product or service to a Gaming Arcade that is slowly going out of business is trying to fight with both hands tied behind your back. It is not that they don’t need your products or services, the demand is there, it is just that they do not have the money to afford it. So unless you have the ability to significantly reduce your costs and increase volume in order to remain just as profitable it is probably best to look elsewhere. 

Finally, the fourth criteria is ensuring it is a growing market, where the demand will increase over time. If you position yourself in a niche where you can work to control a good proportion of market share then the growing market will naturally mean you have a growing business. Companies that stay aligned to serving their markets generally are able to maintain the same percentage of market share as it grows. To read more about this I recommend reading the book Blue Ocean Strategy by W. Chan Kim, Renée A. Mauborgne

Effective positioning strategies take a look into many components to ensure you don’t overlook important factors that impact a company’s ability to be profitable, grow effectively, and build a loyal following of fans. 

Finding a market that is in need of new products or services to fulfil unmet needs, is able to be marketed to effectively, has budget to afford the value you provide, and is a part of a trending market are 4 criteria that you can use to ensure you are positioned well for long term growth, and profitability.

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