2.2 Identifying Product Market Niches

Market Niche

A market niche is a section of a larger market for which a product has been specifically designed. Medium to small business usually focus on a market niche as larger companies usually don't exploit them. Therefore, smaller businesses try to customise their products to meet the needs of such groups.

For example, a niche within telecommunications could be designing games apps for smartphones.

In order to exploit the niche, entrepreneurs need to do market research in order to meet the consumers needs and find out how to make it available to them. They then set out to make the products which have been identified by the market research as required. 

It is important to note that there is the demand in the market which the major competitors are catering for. However, the hidden demand of consumers needs requires new products and services to be applied that would meet this untapped demand. The sales revenue might be lower as the market is usually relatively small. For a new business, this could be perfect to start generating revenue and fuel the growth of your business.

Activity 7 - What is a market niche?

A market niche is a section of a larger market which larger companies are not targeting. It involves untapped areas which entrepreneurs can access through new products and services specifically designed to meet the needs of the customers in that market. For example, a major company who offers a web design portal for new business could be charging a large fee for a custom domain (www.yourdomain.com). An entrepreneur could exploit this niche by offering a service where they could link a domain purchased from the entrepreneur for a price considerably cheaper. This would be meeting the small demand of many customers.


Spotting the market gap

The gap in the market can be spotted in several ways, some very simple and others more complex.

Simple ways of spotting market gaps:

• Size - producing goods in different sizes at various intervals can reveal prospective markets not previously discovered
• Location - consumers like the idea of having the choice where to shop, whether it is over the counter in a local shop or online
• Timing - flexibility in business hours can see a flow of new potential opportunities that would have otherwise remained unknown
• Adaptation - different cultures and practices are practised across the globe. It's always worth exploring new cultures to see the local reaction. 

Here are some more complex ways to identify market gaps:

• Making use of the internet - this gives products a greater competitive edge and uniqueness. Regardless of whether the idea is new or not, the internet will open up a web of opportunity and help identify new markets
• Adapting and modifying ideas from other sources - this is accomplished by exploring magazines, journals and other literature that provides tips and possible business ideas
• Having a USP - this is a 'unique selling point'. This is essential shows how you can differentiate your idea from your competitors. If your USP is s a strong one, it will prompt consumers to buy from you rather than your competition
• Meeting clients needs - the quicker the needs of the consumer can be identified, and solved, the better the chances you will be able to pay attention to the individual needs of the clients. Big organisations might not be able to do this - they simply lack the flexibility. This is an excellent opportunity for spotting a gap in the market and filling it
• Re-invention of past ideas - whether national, regional or international. There are ideas that thrived at one point but for one reason or another, they are now extinct. This is the perfect opportunity for the entrepreneur to discover the elixir for this product that would give it renewed life. 
• Inventing fresh ideas - these ideas are usually thought of to solve an individuals requirements and afterwards it's realised they have a broader appeal. It's different from the common route of identifying a niche and creating a product for the niche, it is the opposite. From nothing, something is created; essentially, a niche is created to accept a product.

Activity 8 - In your own words, describe how to spot a gap in an existing market.