• Section: Money Guide - Category: Home Business
• Written by Katryna Johnson

One of the biggest mistakes a new business owner can make is trying to be all things to all people. Time and time again, those businesses which focus on a select group of consumers and learn how to meet and exceed the needs of that segment of buyers grow their businesses far more quickly and easily than those businesses which take a shot-gun approach.

Identifying a niche to market to is always more cost-effective and efficient than trying to break through the clutter of mass appeal advertising. Only those businesses with incredibly deep pockets can afford to spend money on mass market appeals. Since only the people who truly want or need your product are going to buy it, why do you want to spend money advertising to anyone else?

This is especially true on the internet. With the increasing sophistication of search engine technology and the explosion of targeted websites, ezines, and discussion forums, there is really no reason for a serious marketer to wast

e precious dollars on people who have no interest in their product. Any time and effort you spend determining the characteristics of your best potential customers will pay off ten-fold or more.

If you already have a product or service on the market, the best place to start in analyzing what your particular niche might be is to look at your current customers. Categorize them by age, gender, occupation, how they learned about you, what convinced them to make their first purchase with you, how often have they purchased from you, and any other data you can capture.

Think about your product and what might make it unique in the eyes of your buyers. There may be regional or geographic differences, or maybe your product appeals to one type of customer because of aspect A and appeals to another type of customer because of Aspect B. Take an online florist, for example. One online florist may have discovered that funeral directors in a certain geographic region were purchasing a particular type of arrangement at a certain price point, but they could not sell that arrangement to any other segment of their customer base. General florists were not buying it, general consumers were not buying it.

The questions for the marketer once this information is discovered would be these: Are there enough funeral directors to make it worth our while to continue to offer this arrangement and can we think of additional products to sell with these arrangements to make it the focus of our business? If the answers are No, then funeral directors would not become a niche to be targeted for that particular business. If the answers are Yes, then the marketing team needs to learn all they can about these funeral directors and start testing and measuring products, ads, and offers to verify that it is a viable market.

For many marketers, a quick survey to existing customers asking them the above questions, plus some feedback on your follow-up and customer service efforts, will generate enough data that you can begin to see a pattern. If you have the email address for most of your customers, you may want to use a survey service like Constant Contact to query your customers. Or a short printed survey can be mailed to their home or given to them with a purchase. One suggestion: if you are going to send or hand-out a printed survey, you will get more response if you include a postage-paid reply envelope or give your customers some sort of incentive to reply, like a 20% discount on their next purchase or a $5.00 gift certificate to a local ice cream shop. The incentive does not have to be large, it just has to leave the customer with a good feeling about you and your company.

The second part of the analysis in determining what niche to pursue is often missed by marketers, but it is often critical to success: analyze the competition. If you do not yet have a product or service, this would be the place for you to start to come up with ideas on what types of products or services you want to promote. If you

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