Define and Market Your Niche: A Guide for Small Businesses

Whether you own a local theater summer camp, bakery, or dog daycare, your small business is part of an economic powerhouse. The vast majority of businesses in the US—more than 99%—are small businesses, and these companies employ nearly half of the American workforce. But how can you stand out among your competitors, especially the corporate giants?

One approach is to shift all of your focus to a niche market that you already serve. When your business targets a hyper-specific product or service to a hyper-specific audience, you benefit by preserving valuable resources, reducing industry competition, increasing public visibility, and enhancing your customer relationships.

In this guide, we’ll explore how you can position your business as the authority in its niche so you can attract more customers to purchase your products or services. Let’s begin!

Define your niche.

Craft your unique value proposition.

To determine what niche your business should market to, start with what you are already doing. Consider who you serve, why they choose your business over other companies, the unique attributes of your brand, the special knowledge you hold, and other assets or strengths.

Use these factors to develop a unique value proposition (UVP). A UVP is a short statement that explains why your product or service is valuable to customers and what makes it different from competitors.

To help get the ball rolling, brainstorm a few ideas using this formula:

[Business Name] helps [Your Customers] accomplish [Solution to Customer’s Problem] by offering/doing [Your Product Service].

For example, let’s say you own a dog boarding facility, and there are two other competitors in your town. You note that several customers have remarked on how convenient it is that your company also offers dog training and grooming services at the facility. In this case, your UVP could be, “Furry Friends Retreat helps busy dog owners give their dogs the best care possible by offering all of the services they need in-house.”

Identify your target audience.

Next, take a look at your existing customer base. Instead of trying to reach everyone, focus on your most loyal customers and determine a cross-section between their interests and the services and products you offer. For instance, a summer camp for skateboarders might review its registration forms to identify campers who attend multiple sessions or return year after year, as well as families that register multiple kids.

From there, use your customer database to learn more about these customers and leverage marketing tactics like:

• Segmentation: Segment customers based on shared traits, such as demographic factors, buying behaviors, lifestyle, values, and communication preferences. For example, you could base the groups on what customers value most in your business, like convenience, affordability, and quality. Or, you could create a segment that will promote more marketing success such as creating a group for those who engage more with digital marketing campaigns and another for customers who respond more to direct mail. 
• Audience personas: A persona is a fictional person that holds all of the shared traits for one of your audiences—in other words, they represent the ideal customer for that audience. These personas can be helpful for summarizing a long list of traits and making inferences about that audience.
• Personalization: Finally, tailor communications to each segment’s preferences, lifestyle, and interests. While this should influence the content in the messages (e.g., promoting a sale to your budget-conscious audience), make sure to adjust frequency, timing, message format, and communication channel to suit the audience.

To ensure the insights you uncover during this stage are accurate, make sure your data is clean and up-to-date. If your customer data is incomplete or sparse, supplement your file with additional vectors using a third-party provider.

Perform market research.

Now it’s time to consider your competition. In an ideal world, you would have an interested, engaged audience with a high growth possibility and no direct competition. Realistically, however, it’s difficult to find a niche free of any competitors.

Conducting a competitive analysis will give you a solid idea of which competitors are in your niche, their market segment shares, the sales and marketing approaches they use, standards for product quality and pricing, and missed opportunities. At the heart of this, ask:

“How am I doing compared to X business?”

Ultimately, what sets you apart can be almost anything. Maybe your camp followed Double the Donation’s advice to implement a corporate social responsibility program to promote social good, improve your reputation, and raise brand awareness, which your competitors haven’t done. Or, maybe your bakery has a more impressive catalog of culinary awards and recognition than others in your area.

Rather than blending in with your competition, niche marketing allows you to differentiate yourself and appear as an industry expert.

Make your niche profitable through marketing.

Once you’ve defined your niche audience, determine the tactics, channels, and messaging that will best engage existing supporters and convert new ones. As you begin marketing your niche, be cognizant of the resources and time you are dedicating to the project. Ideally, you want to see a positive return on ad spend (ROAS).

While average ROAS varies across industries, your small business should try to aim for a 4:1 ratio. This means that for every dollar you spend on advertising, your business should earn back $4 as a result of the ads. 

To ensure you can properly track your campaign’s outcome, set goals and choose specific KPIs before launching it. Then, use your technology to track those metrics. For example, a dog groomer could use software like Gingr to measure ROAS by tracking revenue during the campaign.

Offer special discounts and rewards.

Discounts and special offers could convince new customers to test out your niche business. Consider what would most efficiently attract individuals who align with your customer personas and hold their attention. Try out a variety of marketing techniques, including: 

• Offering promotional discounts for limited periods to inspire a sense of urgency. 
• Setting up a loyalty program using punch cards or a mobile app that rewards customers for continuing to shop with your business. 
• Holding free events, classes, and workshops to show potential customers what they could experience through your business.
• Selling branded merchandise and reaping the benefits of word-of-mouth advertising when customers wear or use it around your community. 

Because your customer personas are distinct from those of other businesses, you should directly address the problems and needs of your target demographic with these marketing tactics. Adult dance camp registrants might be interested in free custom dance apparel, whereas a dog daycare might share service discounts or offer free pet grooming supplies to regular customers.

Use multiple marketing channels.

Just as not everyone is receptive to the same marketing tactics, not everyone is receptive—or even has access—to the same marketing channels. To convert and retain customers, reach out to them via multiple channels, including:

• Direct mail
• Email
• Phone and SMS 
• Digital ads
• Social media

Leveraging all of these channels will help you establish multiple touch points with customers, allowing you to stay at the forefront of their minds and boost the chance of them making a purchase. However, it can be difficult to deliver consistent communications across all of these channels. Consider investing in a project management or media scheduling tool so you can effectively manage your time and content.

Like most marketing strategies, niche marketing will require you to review your results, prepare for setbacks, and adjust your plans.

As your business grows and your target market changes, you’ll likely also have to adjust your marketing approach. If you treat these adjustments and setbacks as opportunities to try new approaches, look for new audiences, and develop new products, you’ll begin to see significant growth in your business.