A niche market is a specific portion of a larger market, made up of consumers who have specific needs, wants or characteristics and who are served by particular products or services. It is usually a part of the market that is ignored or underserved by larger, more generic companies, and which can be exploited by smaller, more specialized companies.

There are several types of niche markets, each with its own characteristics. Some of the most common types include:

Behavioral Niche

This niche targets the audience based on their buying behavior. This includes factors such as: customer needs, desired benefits, attitudes towards buying, frequency of purchase and brand loyalty. 

For example, a clothing company might segment its customers into frequent shoppers, occasional shoppers, and shoppers looking for special occasion clothing.

Demographic Niche

The demographic niche targets the audience based on demographic characteristics such as: age, gender, income, occupation, marital status, education and ethnicity. These characteristics are easily measurable and can help companies understand the specific profile and desires of a particular demographic group. 

For example, a beauty products company might target its customers at women between the ages of 25 and 35 who work full-time and have an above-average income.

Geographic Niche

For this niche, the target audience segmentation criterion is based on their geographic location, such as city, state, country or region. This is especially important for companies that operate in specific geographic areas and, as a result, have needs that are unique to that region. 

For example, a company that produces snow coats in places where it snows most of the year. 

Psychographic Niche

Here, the segmentation of the target audience takes place based on their psychological characteristics, such as: personality, values, interests and lifestyle. 

These characteristics are more difficult to measure than demographic characteristics, but understanding them can be the key for many companies to develop competitive advantages and capture loyal customers.  

For example, a camping equipment company might segment its customers into adventurers who like to camp in remote locations and prefer lightweight, portable equipment.

These are just some of the niche targeting criteria that exist. At this point, it is important to note that a niche market can overlap with others: A company can serve more than one niche at the same time, and the same person can belong to several of them. 

Finding the niche market for your business

Below, we present a methodology that can help your company find the most suitable niche market.

Define your target market:

Determine who your product or service is targeting. For example, if you sell cosmetics, your target audience might be women between the ages of 20 and 40 who are concerned about their skin health.

Analyze the competition:

Research who your main competitors are and how they are segmenting the market. Identify the differentials of each one and, from that, define which one will be yours. 

Observe consumer behavior:

Try to unravel the needs, desires and expectations of the audience you want to meet and create from there. 

Don't look for customers for the products that your company wants to develop, create the products that your customers already want to buy.

Search the market:

Conduct market research to assess the potential of the identified niche. Check if there is enough demand for your product or service, what the competition is and what are the main obstacles that can make it difficult for you to enter the market.

Be on the lookout for opportunities:

Try to identify the market's unmet needs That is, those demands that are not being taken into account by existing companies. This can turn into a great opportunity and the emergence of a new niche market.

Assess financial viability:

Finally, assess the financial viability of the niche in question. Check if it is possible to obtain enough profit to justify the investment and if the costs are compatible with the financial capacity of the company.

Combining consumer behavior analysis, competition monitoring and understanding of the business itself, companies can identify and exploit market niches more effectively. Remember that the ideal niche is one that meets consumer needs, has growth potential, and is financially viable. However, this is an ongoing process and may require adjustments over time.

Geomarketing and niche market mapping

Identifying a niche market can be quite a challenge, but it is essential that small and medium-sized businesses can stand out and prosper. According to Forbes, companies that focus on a specific niche increase their chances of success by 60% to 70%.

One of the most effective ways to identify a niche market is through geomarketing, the area combines georeferenced data and market information to better understand the consumer and recognize opportunities. According to Geotab, geomarketing can help increase the operational efficiency of companies by up to 40%, and those that use spatial intelligence for decision making, have a 20% increase in productivity. 

Geomarketing, together with market mapping, is able to identify regions where there is unsatisfied or latent demand, quantify this demand and find out if there is profit potential with the available resources. Also, when observing the competition, it is possible to recognize gaps that can translate into great opportunities. 

Read also: Types of market demand: What are the influencing factors in practice?

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