How to Know if You’re Entering a Viable Niche

Image of Chart for Solving Right-Angled Triangles

When western companies first visited a deregulated India, they were licking their fingers in anticipation.

India was a country of just under one billion people at the time, and businessmen were seeing dollar signs everywhere they looked.

But, numbers alone don’t make sales.

Many companies burned themselves trying to get off the ground, because the vast majority of people simply couldn’t or wouldn’t buy their products.

They learned — after a lot of trial and error — that sheer numbers aren’t everything.

It’s impossible to know in advance if your business venture will be successful online. So, I suggest you look for one big factor before you start out: competition.

Huh? Competition?

Yes, competition. If you can find a ton of competition in the market you’re in, then you’ll know it’s extremely viable.

Why? Because a whole truckload of people have been there before you, and have been able to keep their businesses afloat.

But just having a large number of competitors still isn’t the best denominator — so I suggest you go even further in your investigation.

Subscribe to some of your competitor’s email lists and Twitter feeds, see what they’re doing out there in the world. Are they selling higher priced products and services? Or is it all a discount play?

If you find higher prices, then you’ll know for sure that there’s a market — and a high priced market, too.

If those high prices continue over the years, you’ll know that particular niche is sustainable.

This isn’t a foolproof method.

You’re looking in from the outside, and it’s hard to know for sure what profits exist in the business. But you can be fairly certain that if you find a lot of competition on your topic, the niche you’re looking at is a profitable one.

This is how I got into marketing

Years ago, I was fascinated with marketing, but mere fascination isn’t enough. The book that nudged my life in a different direction was “Good to Great” by Jim Collins.

Collins introduces a concept called “The Hedgehog Principle,” and it consists of three questions:

  1. What are you deeply passionate about?
  2. What can you be the best in the world at?
  3. What drives your economic engine?
Image of The Hedgehog Principle

I was passionate about marketing, and I know I could be the best in the world at it (if I dug in and did the work.)

But the companies trying to get a foothold in India never answered the third question.

What drives your engine? How viable is this niche?

The answer must come from the market

Generally, the higher the competition in a market, the more viable the product or service attached to it will be.

If the market is saturated with fad diets, you’ll have a better chance of writing a bestseller about a fad diet — versus a rigorous lifelong lifestyle change.

If TV is swamped with reality shows, you’re better off making yet another — yes, another — reality show.

When I got started on my marketing journey, people like Jay Abraham were selling seats at workshops for $5,000. I went to workshops that were priced at $10,000.

I could see that people were selling online and offline marketing products — and for pricey sums, too.

Price is a good benchmark

High prices show that not only does a market exist, but it’s a mature market.

And high prices also allow smaller players to co-exist.

If everyone is discounting each other in a tiny market, then you struggle to get off the ground. But if there are several layers of pricing, it’s a lot easier for you to enter the niche and slowly power your way up the ranks.

But what if you don’t want to follow the crowd?

Don’t want to be a lemming?

That’s noble, but the pioneers always take all the arrows.

The pioneers are the ones that have to educate the market — and that takes a lot of time and effort. It’s a lot better to follow the crowd (read: competition) and start off there. But you then carve out a position in the market by doing your own thing, so you can build the audience that will support your business.

Get started today with researching your niche, and place a premium on looking into the competition factor. It may be the smartest marketing move you ever make.

About the Author: Sean D'Souza offers a great free report on 'Why Headlines Fail' when you subscribe to his Psychotactics Newsletter. Be sure to check out his blog, too.

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  1. When I studied Marketing years and years ago our lecturer always drilled the following formula into our sluggish heads:

    Market + Product (or Service) = Good Chance!

    I have also noticed that people tend to neglect the very important market aspect. Especially doing proper Research.

    Thanks for your Reminder.

  2. I had a good friend share with me one it comes down to three things:

    1.) What are you passionate about doing?
    2.) Where can you serve or accomplish your passion?
    3.) Where can you get paid to for the #1 and #2?

    Very similiar, it’s one thing to find your passion, but it’s another thing to actually get paid to do your passion! I think that’s when you have to step out and be vulnerable and give your best shot!

  3. I like the Hedgehog concept and answer all of the three questions will help you achieve success in any niche.

    I think there’s still a place for newcomers in any niche even If It’s crowded, only If you think you can do something amazing.

    I loved your idea of knowing that whether we’re entering in a viable niche or not.

    • There’s always a niche in every crowd. If there wasn’t, Google wouldn’t exist. Neither would Apple. But someday, Google will be just another player and so will Apple. There’s no such thing as a too crowded market. People are always looking for something that’s more specific to their needs. And when that company (or person) comes along, a new niche is formed.

  4. I like the Hedgehog concept! It’s new, fresh & seldom thought of.

    As far as my experienced is concerned, the styles of the established blog & bloggers can be considered only for inspirational purpose. Or if we try to to copy them as it it, we will be hit by Panda, Penguin, & what not! If visitors are willing to look elsewhere too without having to stick to a blog forever, chances are good that the new upcoming blogs & entities will get a chance to get noticed. Hope that happens!

    • I don’t think so.
      Panda, Penguin etc, is only if you’re playing tricks. If you create solid content, and your stuff is somehow different, you are going to stand out. Every day a new business starts up somewhere. The key is in knowing if the business is viable. It may not be, because the concept/technology is too new.

      It takes time to adopt new ideas and hence a ton of capital.

      Amazon could bludgeon their way with the Kindle because of both capital and a massive list. But otherwise the concept of a Kindle is a new idea. It’s easier for other players to sit back, let Amazon do the educating and then come into the market.

      Your goal as someone who’s starting up is to make sure you get into a field that’s already been tried and tested. No one is saying you have to, but it’s a smarter idea to be sheltered a bit when starting up. Once you’ve got yourself some a bit of a reputation and solidity, then you can do an Amazon and go wildly ahead with a brand new idea that may or may not eventually succeed.

  5. Most people come up with aconcept and think it’s revolutionary, because it’s never been done before.

    That makes it a really hard sell, because then you are asking your customers to be early adopters.

    • Exactly.
      It’s expensive in terms of time. A lot of time is needed.
      And a lot of money to educate others.

      Think of it as a duck formation flying ahead. The leader duck gets the full blast of the wind. The rest of them are a lot less affected. Yes, someday you will need to get to leader position too, but that day isn’t today.

  6. My passion has no market, yet. And yes the arrows make me bleed all over the place.

    Joel Barker talks about the “Paradigm Shifter” the “Paradigm Pioneer” and the “Paradigm Settler.” The Hedgehog marketing plan you outline fits his Paradigm Settlers–they are the ones who built the towns, schools, businesses…. hard work, lots of risk–but they benefit from the work of the “shifters” and “pioneers.”

    Daniel Boone, Lewis and Clark, Henry Ford … were all “shifters.” They made change. And they did not have a niche until they made one.

    I guess the lesson is to just keep learning, understand the business success and fundamentals of marketing and look for opportunities. And then, grow a thick skin to deflect the arrows. :)

  7. Great Article find a viable Niche…I choose WordPress as a niche will that be a viable niche ???

  8. Awesome post Sean. It’s kind of with conventional wisdom, but a little bit against it. It always bugs me how most start up advice tells you that you need to innovate – when in reality, there isn’t enough room for everyone to innovate constantly anyway. Just doing the same thing but a little better is how industries develop in the long-run.

  9. A good eye opener? Proves that marketing is not just about the numbers, especially when trying to enter a foreign market that has its own nuances and customs. I like what you say to not just follow the competition, but to drill down and see exactly what works.

    • In fact you can enter a market that’s staggeringly huge and still make your mark. Recently we sold a product where you paid $200 for four weeks of training vs. a $200 million company that offered 52 weeks of training and 500 more titles than we did.

      People still wanted our stuff.

      You hear about the fact that you have to build a better mousetrap. You don’t. It just has to be different enough for the customer.

  10. It does seem counterintuitive to an extent to jump in where others already are flourishing. And at the same time it makes sense. Because obviously there is buying and interest. The questions would be how can I make this better? What can I add that will help me get to the top of the heap? How can I improve upon what’s already being done well? And question 3 of the Hedgehog concept. Some creative types have to really push through obstacles to figure out the economics…or continue to live as a starving artist!!

    • Making it better depends on the product or service. But often you can make it better by having less, than more. Incredible as it sounds, more and more people are fed up of getting an overload.

  11. Excellent point Sean,

    It takes some time to figure this out but it’s much easier to sell people what they already want to buy.

    That is unless you have a celebrity or someone extremely popular to help you promote.

  12. Great article, Sean!

    I think you’re dead on. It’s so much easier to go after a competitive market and finding a gap to fill than it is to try to forge new ground. It just doesn’t make any sense to me to try and do that.

    For one, a vast majority of new marketers don’t have the necessary skill set to effectively go after a gap in a niche, let alone try to create a whole brand new niche. I know I certainly don’t have the requisite skills to try that. It’s taking a large portion of my time just trying to improve myself enough to be able to swim in an already active niche.

    It’s difficult competing with the big dogs. It’s even harder to venture off into new territories having to convince people to pay attention to you against all conventional wisdom. There are a ton of experienced, high income earning marketers who don’t think it’s worth the effort to create an entirely new path. If they don’t think it’s worth it, it’s definitely not something that I should be considering at this stage of the game.

    Thanks for sharing such valuable information!

    ~Barry

  13. Very smart article. Good business advice. Completely agree, Sean.

    But it also makes me think about the difficulties facing content marketers and freelance web writers.

    Even though sites like Copyblogger are the real “pioneers,” those of us choosing content marketing still have some trails to blaze when it comes to convincing others this is the best way to sell. And while there is certainly demand for writers online, we’re still recovering from what content farms did to the price quality writers can charge.

    Not trying to be a Debbie Downer…just sayin’.

    • Not true.

      You can win in any market. You chose Copyblogger as an example. Well, Copyblogger (if I’m not mistaken) started in 2005. There were tons of content websites on the market since 1997. 8 years on the Internet is a very, very, very long time.

      So it’s fine to compare yourself with Copyblogger, but when they entered the market, it was already saturated with a million websites on the topic of marketing and copywriting. Every generation that follows thinks the one before had it easier. It’s not true at all. Even those who started with Copyblogger may not have reached the same position because they took a different path and reached different results.

      If logic prevailed—well, sound logic anyway—Copyblogger would never have started. But it did. And here you are.

      • I get what you’re saying. I wasn’t really trying to compare myself or anyone to Copyblogger, or complaining about the situation, or trying to shoot down your logic.

        I’m talking about getting the marketing industry or businesses in general to accept and understand the concept of content marketing. I think you’d agree that many in-house marketing departments still have difficulty convincing the brass that content development is worth the investment. Traditional media is still clueless and resisting the change. I don’t know – maybe it’s different in your circles.

        Content marketing online (the good kind) really entered the mainstream last year, right? 2005 to 2012 is 7 years. That’s a long time on the internet. ;) And it’s why I’d still call Copyblogger a pioneer site. I was never trying to say they had it easy, just that the struggle isn’t over quite yet.

        I realize your post concerns choosing the right niche. But it could also be applied choosing the best product or service, am I wrong?

        I guess I’m trying to apply your same ideas to the act of content marketing – the difficulties of working as a content marketer – not necessarily choosing the topic as a niche for a blog. I think that’s where we aren’t connecting.

        • This is an interesting time for content marketing because the trend is moving right now. 2013 will be a much easier time to sell content marketing services than 2012 was. But I agree that for many businesses you’ll still need to connect some dots.

          We do have some things cooking that will help with that, so stay tuned. :)

        • Yes, it is a long time on the Internet. We started our own content-based business at Psychotactics in 2002. So as you can see, that’s even a longer time. So Copyblogger is a relatively newer site (and not a pioneer site) in comparison. Even our site wasn’t a pioneer site. I was buying products and content a lot before we even began our business. In a time, where banks would look at you in a weird manner if you said you wanted a merchant account for your online site. Content marketing has existed online for a much, much longer time than a lot of people are aware of.

          I do agree that traditional media is still clueless. But be aware that they’re not just clueless, but also very confused. They aren’t quite sure where to go, or what to do, because there is a lot more noise in the marketplace. Back in 2002, for instance, anything given free would attract hordes of visitors and subscribers. Every teleconference call was like Christmas Day with 500 people on the call. But the distractions didn’t exist.

          When you get into the marketplace with something brand new and then have to slog through educating your market, and yes—fight with all the distractions, well, it’s a slog (And it becomes as tiring as this lonnnnng line). But yes, the concept of using the right niche can be used for any product or service.

          Maybe we’re not connecting because I’m not absolutely clear about your definition of ‘content marketing’ to begin with. Maybe mine is different.

  14. This is a great post and something I try to impress upon my audience when I asked them how they plan to get their passion off the ground, impressing upon them they can either be the first one who does something unique as long as their personality(and product) can sustain the criticism and revisions it will take to get to viability or they can tweak what already works and put their own unique spin on it. I always get comments like, “But there are so many other cupcake makers, photographers, illustrators, mechanics, etc..” Really? Well, there are so many other people too but you’re not exactly like any one of them. I call this the”maybe if I were an alien, it would sell better” mentality.

    • Correct. And in many cases, the people that aren’t No.1 can be more profitable.

      Nintendo was No.3 in the games market and making more money than No.1 or No.2. That should be a good example for your case study.

  15. I think finding your niche is something that a lot of people have a tough time doing and when they see competition they take it as a sign that it’s already been done before, so why bother. The cool thing about the hedgehog concept is that it’s not about finding a whole new wheel to invent, but figuring out how make one of the spokes of the existing wheel just different enough to stand out.

    If your niche isn’t profitable, find a new niche, approach a new market or put a different twist on how you’re marketing your product to your audience. Competition is a good thing, it helps us innovate and evolve.

  16. It sounds like you’re saying, don’t innovate, just do what other people have been successful at.

    jump on the band wagon.

    this can be successful, but only if you jump in at the right time. In 2006 people where making money hand over fist buying houses and fixing them up. a lot of people joined in. if the floor falls out underneath you, and you’ve spent all your resources following a trend and not looking at whether is makes sense or is needed…

    • I disagree. It doesn’t sound like the article is about “don’t innovate.” I think there’s just a sober warning that a new niche can mean you’re the pioneer who has to train the public, get the buy-in, and take the risk that it won’t work. But, it might work.

      That’s in contrast to things like gas stations, restaurants, laundromats, etc. Does a city need one more laundromat? Maybe, maybe not. But the thing the laundromats have going for them is that the customers know what they are. So, if you open a laundromat, you aren’t doing something that you have to explain IN ADDITION TO making the business profitable. That’s not an invitation to jump on a bandwagon.

      In my business, I scrub data for small businesses. It’s taken some people 6 months to get their mind around what I do. For some, they understand the cleaning of their data and they assume it’s a $10/hr admin task. No. I write code and automate a lot of the work. So, I find myself explaining why I charge a professional rate. We could say that I have no local competition, but really, there’s a battle of opening minds and helping them see the value.

      I wouldn’t have that challenge if I’d opened a gas station or became a divorce lawyer.

      • I wish I had read this article 6 months ago before I started my own business which is so unique that I feel I have to constantly spoonfeed people explanations of what I do.

        I have practically no competition in the whole of South Africa but trying to explain to people how my business, as a short term insurance consultant and claims mediator, is different to a standard broker can be exhausting. I originally started my business with the concept of helping the average person and small business owner against insurance companies and brokers who would take advantage of them, however it’s taken me 6 months to discover that my target market doesn’t want me. So now I’ve had to re-structure my business concept. I want to target corporates now but I’m probably going to have another 6 month battle trying to get my foot in the door with them.

        I love what I do as I’m passionate about insurance, it’s just time consuming having to educate people to help them realise why they need me and what I can do for them.

    • It’s really about focusing on what you know people are interested in paying for.

      If you’re just a clone, there’s no reason for any customer to pick you, so you need a fresh approach and a fresh way of framing what you do. But when you go into absolute uncharted waters, they may be uncharted because very few customers want to buy anything there.

      • Yup and yup! That’s the risk pioneers take. The uncharted territory may be because no one thought of a brilliant idea or, several have already tried and it proved to be inhospitable territory.

        As Seth Godin describes in Purple Cow, the pioneer needs to find the early adopters. The general public isn’t going to trust someone/something brand new. If the early adopters buy in, that’s the entrance to the rest of the market.

    • Innovation is extremely important. Even in an existing field. I’m not saying “don’t innovate”. I’m just saying: Make sure you don’t get the arrows trying to play pioneer.

      About the marketplace falling under you: Doing your due diligence in a field is very important. But even so, even with that diligence, the marketplace can collapse. But what you’re referring to, where prices run crazy is often greed, not usually a long-term business.

  17. This helps explain some of my struggle. Yes, I’m in a niche where there’s just me. Yes, I’m having to do a whole lot of explaining, illustrating, and justifying.

    • That would explain it. But you can make your life easier by comparing yourself to an existing service or product. E.g. What is sushi? Well, today you know, right? But 20 years ago it was weird to eat or think of eating sushi. Same thing if I were to tell you to eat an idli-sambar. It’s hard even getting the pronunciation right. But then if I were to say that sushi is “tiny chicken wraps in rice” or “idli” is a rice-based dumpling, then you get it. Doesn’t mean you’ll pay a premium price for it just yet, but when the marketplace gets a little mature, you can sharpen your message. At first, you can only hope to compare between yours and an existing product.

      • What I’ve discovered is that my best clients have a sense of
        1. Messy data is costing them money
        2. Excel is more powerful than their skill level
        3. It’s worth paying a professional to come in and clean what they have.

        Then there are many more who assume that this is cut-&-paste work that they’d rather not do but they’d pay $10/hr to have someone else do it.

  18. The trick is finding out how viable those competing businesses are. If they’re all holding on by their fingernails, then perhaps it’s not as good of a market as it looks. You want to find a need and fill it, not just make what everyone else is making. Sure it’s easy to jump on the bandwagon, but if you can make something fresh that people want, that will be more valuable and well-received.

    • I agree. But that’s a toughie. Everyone’s busy showing you their flashy cars and helicopters and running slow motion on the beach. It’s hard to tell what the real facts are. And whether they’re actually making as much money as they should. The viability of the market in terms of real profit is definitely important, but a lot trickier.

      Fresh on the other hand may be well-received if it gets noticed. Most of the products you use today from the iPhone, to Google to a lot of products/services were invented and introduced by someone else. So yes, it may be well-received but it’s also greatly fraught with danger.

  19. I’ll never forget attending an AZA conference (Association of Zoos & Aquariums) where Jim Collins spoke about the hedgehog model. He made sure to tell us that it did not mean that you go build an exhibit for hedgehogs. He thought we were the only group that might take his advice literally. Anyway, it never sunk in until I read your post. It’s time to figure out if my niche is a viable one, it’s tough to figure that out!

  20. Good point on following the crowd. The reason their is a crowd in the first place is that there is a demand. However even in the overcrowded niches there are off shoots or micro niches that can be targeted with out having to fight with the big guys.

    Goal + Research + Plan + Action = Success.

  21. I found that reading through forums in a niche helped reveal the problems people complain most about. That gives you a clue on how to focus on the solution. Then make the solution stand out by offering what competitors don’t have. Make it similar so people are familiar to it and already attracted to it, but add what isn’t already being offered elsewhere.

  22. Sean,

    I’m finally taking this advice to heart. Previously I pursued software outsourcers out of Latin America as potential clients, trying to get them as clients to do marketing for them so they can successfully enter the U.S. market. This wasn’t a very hot market, and I should have known when I didn’t really see a lot of competitors. I thought because I was one of the only people offering this service, I had the market cornered. And I did have it cornered, except nobody was buying.

    But I did notice there were hundreds of these little software development shops, from Mexico all the way down to Argentina, and they were all offering their services to U.S. companies. And suddenly it dawned on me: I could start my own software development shop, be one of the hundreds. But the big difference is I know I can crush it: I know how to market.

    The irony was, I was trying to sell these guys marketing services, but they weren’t buying. So instead I’ll just become their competitor in a crowded market, because I know U.S. companies are buying, but I’ll do it so much better than them.

    Thanks for putting it all into perspective Sean!

    Fernando

  23. You don’t know how much sense this makes. But then again, I’m certain you do know and that’s why you wrote the article. I find the part about taking all the arrows interesting and so true. Finding one’s way in a crowded market makes perfect sense. After all, that’s where all the buyers are too.

  24. Great post! I run a small IT company and constantly exploring sustainable niche helps us to grow.

  25. Great advice!

    When I started out I thought that competition was bad. Now I understand how completely wrong I was.

    You brought up a great point about being a pioneer. I think many wish they could be someone like Seth Godin, but trying to do what he does isn’t probably the best move when starting out.

    • I don’t think Seth Godin does very much pioneering stuff. Most of his projects or books have been part of an existing platform. At least, that’s based on what I know.

      • Interesting. I’ve always thought of him as kind of a thought leader in the field of marketing. Maybe that isn’t the same as what you meant by a pioneer.

        Could you please provide me some examples of people who you consider pioneers?

        Thanks!