The worst “business” advice I’d ever come across in my life has got to be “Follow Your Passion, the Money Will Come.” This advice is particularly disastrous in the online marketing world, where it is really easy to sink a ton of time, energy, and money in a digital endeavor you are passionate about – such as producing an online event, or building a website – only to generate marginal income.
Think about it. Being well informed and enthusiastic about your passion is not enough to build a profitable business out of it. You must make sure your market has enough profit potential to meet your financial goals, especially since you will need to invest some money to get your business off the ground.
Just take the costs of establishing a professional business website – not a ugly, crappy, free website – but one that has a strong visual brand, optimized to show up in search engines, capture leads, or facilitate e-commerce. One that shows that you are serious about doing business. You will need to spend time, energy and money on design, web development, copywriting, web hosting, SEO, etc. If you cannot demonstrate an ROI on your endeavors, especially after a couple of years, according to the IRS, it’s not a business, it’s a hobby.
So if your goal is to make money on a business, rather than spend money on a hobby, then choosing a profitable niche market is absolutely critical. And there is an art to choosing a profitable niche market without selling your soul, especially one that you are passionate about.
It all boils down to the niche profitability.
What is A Niche Market?
A niche market is a segment of the market on which a specific product is focusing. Any market can be further divided into smaller market segments with specific interests and demographics. For example, the love market is huge. Within the love market, you can find niche markets focused on soulmate search, ethical polyamory, green dating, sacred sexuality, and more. These can also be drilled down into sub niches, such as “over 40 soulmate search” or “sacred sexuality for gay couples”. Some sub niches can be highly profitable, so it’s worth doing some analysis to determine if the one you are passionate about has profit potential.
What is Niche Marketing?
Niche marketing involves the art of defining your particular niche and marketing your product or services to this niche. Many business owners view the idea of niche marketing as a strategy that will cut their profit margin or limit their sales, but the truth is, having a well defined niche can give your business more power, especially if the niche has enough demand and money in it.
The better you can define your market, the higher the likelihood you can hone your marketing message to resonate with this market, turn this audience into fans, who will buy and rave about your product.
The Science of Researching Profitable Niche Markets
Researching profitable niche markets can be tricky. It’s easy to assume that a market characterized by high demand is profitable, but that isn’t always the case. A great example of this might be the cookie baking market. You might be great at baking cookies, but starting a blog about cookie baking may not be profitable for you, especially if all your visitors are seeking quick recipes and not really interested in buying anything.
I’m going to share with you a basic methodology, as well as some free tools, commonly used by Internet marketers for niche research. While this approach is oriented towards entrepreneurs who want to create a revenue generating website in the niche of their choice – which is essential if your business is entirely online – it is also extremely powerful if you are a brick and mortar business seeking to grow online income streams.
While niche research techniques might differ slightly, depending on whether you intend to sell digital products, physical goods, or services the principle remains the same.
Step One: Identify Your the Audience
If you are an early stage entrepreneur looking to start a viable business in a market you are passionate about, rather than focusing on what product you want to sell, start first with understanding your audience. Why should you concentrate on a niche audience first, instead of products?
According to Chris Ducker, outsourcing guru and Internet business entrepreneur, there are two solid reasons to prioritize finding an audience to promote to over identifying products to promote:
Products come and go, but niche audiences stick around forever. If you’ve ever been promoting a product profitably and then had it decline in popularity (or pulled off the market entirely), you know what I’m talking about.
When you choose a niche audience and take the time to understand their needs deeply, a whole new world of options open up to you. You switch from struggling to find ideas for products, to instantly knowing exactly the types of products you should be promoting – because they’re in tune with your niche audience’s needs.
While his advice is geared towards affiliate marketers who earn commission from products they promote online, it’s great advice for any entrepreneur seeking to better connect with a targeted audience of customers who have both the inclination to buy AND the capacity to pay.
Step Two: Research Your Niche Market Keywords.
In this step, you want to identify what keywords your audience uses when they research topics related to this niche market, especially searches related to their problems, pain points or deepest desires.
This information will not only tell you what topics your audience cares about the most, it will tell you whether or not there is enough profit potential in this niche.
A fun and easy too to start with is the free Google Adwords Keyword Tool. You can use it to identify the keywords your audience is using to research products, services, solutions, and information related to this niche market.
The tool provides lots of useful data related to these keywords (especially if you use this tool while logged into your Google Adwords account) such as local and global search volume, level of competition, average cost per click (CPC) and more.
What we want to pay attention when we research industry keywords is the monthly search volume. The higher the search volume, the bigger the market. As a rule of thumb, anything over 1,000 exact match searches a month is worth looking into. However, there are some niche markets with smaller monthly volume that have profit potential as well, especially if the market is hungry, and there isn’t a lot of competition.
Let’s take the personal development market. Within this market, at 49,500 exact match searches a month, globally, this is a sizeable segment of people interested in all things related to the Law of Attraction.
Step Three: Analyze the Competition
The level and quality of competition in a niche is a good indication whether the niche is lucrative or not. The most lucrative keyword niches, are typically characterized by:
- High average cost per click (CPC)
- Multiple pages of ads
- Advertisers in the top 3 premium positions
- Ads that are highly targeted to the search keyword
While the Law of Attraction niche is pretty sizeable, competition appears to be medium to low, and with the average CPC less than $1.
This raises the question of whether or not this niche has enough money in it to make it worthwhile to establish a business there. The best way to get an idea is to see if there are any pay-per-click (PPC) advertisers bidding on “law of attraction” keywords in Google Adwords. Google Adwords ads are the text ads that appear at the top and on the right side bar areas of Google search results pages.
As you can see, while there are a lot of competing pages in the organic search results area, this high key phrase is devoid of PPC advertisers.
The lack of PPC advertisers suggests that this key phrase isn’t particularly lucrative and that the law of attraction may be a tough market to make money in. At 48 million competing pages, it will be extremely tough for you to launch a new website and rank on Google page 1 for the term “law of attraction.” Chances are, it won’t be worth your time.
Not to say that it isn’t a profitable niche. Asking yourself why no one is advertising will yield a lot of insight. A great way to find answers are in the list of keyword suggestions presented by the Google Keyword Tool. Are most people looking for Law of Attraction books? Could it be that most people are looking for free information. Beyond the book, are there other kinds of products this target audience would actually buy? Coaching? Courses?
At this point it may be worthwhile drilling down to long tail keywords related to the the niche market’s pain points and desires. For example, people who believe in the Law of Attraction, are finding it’s not working that well for them and are seeking help in unleashing its full potential.
You can see here that there are advertisers in this keyword niche, which suggests there is money to be made. However, the number and quality of the ads and advertisers suggest that “law of attraction courses” is not a hyper competitive market, and that there may be room to accommodate new players.
However, just to be sure, it’s good to circle back to the Google keyword tool and see if there is enough search volume for this keyword niche to support a viable business. With only 36 exact match global searches a month, it would be tough to build a business focusing solely on selling a Law of Attraction course.
Step Four: Research Industry Trends
Another critical piece of information to have is where the niche market is going. A great free tool to use is Google Trends.
As you can see, interest in Law of Attraction peaked in 2007 and has been on a steady decline ever since. This indicates that it is a declining market. This means, it will be increasingly difficult for you to grow traffic to your website, if overall traffic in that niche is shrinking. If you want your business to be a long term business, it’s better to establish yourself in a market that is growing or at least relatively stable, rather start your business in a pie that’s shrinking.
Step Five: Decide if You Want to Enter the Niche Market
At this point, you’ll need to decide if the market is worth getting into. As I mentioned before, the Law of Attraction courses sub niche indicates profit potential, but not a lot of competition. Unfortunately, it doesn’t show a high enough monthly search volume to be viable on its own.
As a rule of thumb, if you see a ton of highly targeted ads at the top and in the right side bar, on multiple pages, with the top brands in the market consistently in the 3 premium spots, it will probably be tough to break into that market as a newbie. You’d be up against established brands with large marketing budgets.
That being said, there may be other profitable long tail keywords (thus audiences) in the Law of Attraction market that you can target. It’s up to you to drill down into the niche to identify what profitable keywords exist and what services, products and solutions this market might be eager to pay for. So if you are determined to be in the Law of Attraction market, the solution would be to establish a web presence around a less competitive keyword, and go after the audience associated with that niche market.
What do you think?
- Do you have a different approach to niche marketing?
- If so, what works for you?
- Are there any tools you recommend?
Please share your comments below!