Journey Into Internet Marketing – Part 2 Tutorial

Niche Research

Overview

This is the second part of the tutorial series “Journey Into Internet Marketing”. If you have not done so, it is recommended you read over Part 1 – Introduction To Internet Marketing first.

1. What Is A Niche?

A niche is a subset of a main market that has a recognised customer base with common needs. The key word in the last sentence is ‘subset’. It implies that a niche is a segment of a main market, and by definition is smaller than the main market.

A main market could be something like computer software, while a niche would be antivirus programs. As an Internet Marketer, it is often desirable to focus on niche markets, and generally the smaller the niche the better.

There are several reason for this:

When you focus on a niche, you have less competition in both numbers of competitors and size of competition. Let’s consider our example of computer software and antivirus programs. There are literally thousands of companies that produce and market computer software ranging from the giants like Microsoft, Apple and Oracle to small one-man bands. However when you think of antivirus programs there are only a handful of companies that produce antivirus software.

When you think of Search Engine Marketing, which we will come to later, it is easier to convert traffic that searches for niche products than traffic that searches for more general products. This means that your ROI investment will usually be higher in a niche market since you will need less traffic to make the same number of sales.

When you focus on a niche, you sell just one type of product so all your efforts are concentrated, and you can quickly become established as an expert in that niche.

You will also be able to develop relationships much easier when you focus on small niches as opposed to large markets. You will quickly get to know whom the other players are, and can find ways to arrange joint ventures with them.

Advertising is also cheaper in niches, because you are not trying to sell everything under the sun. Your advertising campaign will be coherent and tightly focused. You will also find it easier to get bulk discounts when you focus on niches.

There are thousands of online niches available to be exploited. So when you are thinking of a market to target… think narrow as opposed to broad. There is virtually no limit to how narrow you can go. As an example, you could narrow the antivirus software niche by going after ‘antivirus software for apple Mac PCs’ and even narrower by going for ‘free antivirus software for apple Mac PCs’ and then maybe ‘free avg antivirus software for apple Mac Pcs’.

Targeted Niches vs Mainstream Markets

In the previous section, I explained that niches tend to be less competitive than large markets. Savvy Internet marketers take advantage of this fact in many ways. For instance, instead of writing one ebook on dog training, you could use the same ebook and rebrand it for the different breeds of dogs, so you’ll have ‘training your german shepherd’, ‘how to train pit bull terriers’, ‘train your spaniel to sit’ etc. Each book will have basically the same information, but you target it towards the specific breed.

You will find that by doing so you will have less competition to contend with. If on the other hand, you published a book on general dog training without a specific niche of dog training in mind, then you can expect the competition to be a lot more fierce.

Less competition means that you can charge higher prices too, and so does the fact that you are specialising. Specialists can always charge more than generalists.

So it always pays to go for targeted niches. As you become more established, you can then take a punt at more mainstream markets. By then you would have established a reputation in the market, and should have developed a following.

When you target a niche, you will also find that many of the big players in the mainstream market will not bother to compete in the targeted niche. This means that not only do you have less numerical competition, the odds are stacked more in your favour when you are in a targeted niche market simply because there are fewer heavyweights to dominate the market. That is why you should almost always look to target niches instead of mainstream markets.

I am not in any way suggesting that competition is non-existent in niche markets. However, I am saying you will find the competition easier to deal with, and that in itself is a massive benefit.

Why is competition a problem?

I thought you’d never ask. Actually competition by itself is not a problem, because when there is competition in a market that tells you that the market is profitable. So you actually do want a market where competition exists, unless it is a brand new market that nobody else is aware of except yourself. It is unlikely you will find lucrative markets with no competition when starting out.

The major issue with competition is that the more competition there is – the more difficult it will be to rank highly in Google, and the more expensive your advertising campaigns will be. You will therefore find it difficult to attract traffic to your website. That is the problem. I am sure you are aware that traffic is the lifeblood of any online business. Without traffic your business will haemorrhage and die.

Ranking highly on Google is one of the most reliable ways to get targeted traffic to a website. The level of competition in a market is one of the key factors that determines how highly you rank on Google, and that is why it is not desirable to compete in markets with massive competition.

2. Finding A Niche

There are many ways to find niche markets, and people have been successful using different approaches.

One way to find a niche is to consider what you are good at and passionate about. Do you like vintage cars, do you spend a lot of time restoring vintage cars? Then the vintage car niche could be an obvious choice for you. Don’t forget the narrower the niche the better, so what about British vintage cars? Is that a good niche to target?

It is not enough to find a niche that you are passionate and knowledgeable about. It is important that you establish that there is actual demand in that niche for products and services. You might know everything there is to know about Betamax videos, but if nobody else is interested in that niche you will struggle to make money. You should always remember that IM is a business not a hobby.

The reality is that it is not always possible to identify something that you are passionate about that also happens to be a lucrative opportunity. That is not the end of the world. All you have to do then is focus on niches that are lucrative. Ideally, you would want this to be something you enjoy, but no one ever said you couldn’t make money from things you don’t enjoy. One thing too, is that you could actually start to enjoy the niche you select.

One very good way to find niches is to visit popular forums, and find what people are talking about. Listen to the questions they ask, and the products that they talk about. Careful observation could give you lots of ideas for niches.

If you visited a holiday forum, you might discover that Spain is a popular destination, and that a lot of questions are asked about how and where to find cheap holiday villas in Spain. You could carry out a bit of research and decide to target the cheap rental holidays in Spain niche, and you could narrow it down further by targeting a specific holiday destination in Spain e.g. Majorca.

You could also visit popular ecommerce sites like Amazon and eBay, and look at their best-seller lists. Look out for product types that are very popular. For instance, digital cameras and IPods are popular on Amazon right now. You could decide to target Canon digital cameras, or even a specific model of Canon digital cameras.

Magazines are also an excellent source of inspiration for niches. There are several Home and Garden magazines. Browsing through these magazines could reveal that vinyl garden sheds are increasing in popularity. This could warrant further research into garden sheds and may well result in you targeting the vinyl garden shed niche.

Always remember that the ideal scenario is a niche where there is a lot of consumer demand, but where the competition is not overwhelming. If the niche is something you are passionate about, then that is an extra bonus.

3. Profitability & Conversion

In the previous section, I stressed the importance of finding niches that are in high demand and have low competition. This really is the Holy Grail of IM. If you understand this one concept, you will find everything else much easier to contend with.

Consumer demand features high in the factors that affect the profitability of a niche, but so do price points and conversion rates. An obvious example is cars. Porsche cars cost a lot more than Fords, but this does not necessarily mean that a Porsche dealer will be more profitable than a Ford dealer.

If there is higher demand for Ford than there is for Porsche, then the Ford dealer could very well be more successful than the Porsche dealer. Even with the same demand, the conversion rates for the two cars will play a huge factor in the profitability of the dealers.

If for every 100 people that came to view a Porsche only 3 bought a car, then the Porsche dealer would have a conversion rate of 3%. On the other hand, if for every 100 people that viewed a Ford, 10 became buyers then the Ford dealer would have a 10% conversion rate.

When a niche has high conversion rates it means that the return on investment (ROI) from their advertising budget is higher than the ROI of a niche with lower conversion rates. It also means that less traffic is needed to generate a certain number of sales. If two websites have the same number of visitors, but site A has a higher conversion rate than site B, it follows that site A will make more sales than site B even though they had the same amount of human traffic.

Such is the importance of conversion rate, that by simply increasing conversion by 50% it is possible to triple the profitability of a business, especially one that deals in high ticket items like cars.

The implication then is that when choosing a niche, one ought to be aware of:

  • Demand
  • Competition
  • Price
  • Conversion
  • In addition to these four, it is also useful to be aware of return rates across niches. Some niches such as FOREX are notorious for having very high return rates, and this obviously has a negative impact on profitability.

    Conclusion

    Niches are an important part of IM. A niche is a smaller segment of a mainstream market where users have a common need. As an Internet Marketer one of your first jobs is to identify a profitable niche to operate in. Typically, this will be one with high demand and low competition. Price, conversion rates and return rates also play a part in determining the profitability of a niche.

    It is now recommended you proceed on to Part 3 – Introduction To Affiliate Marketing