How to Research a Profitable Niche Market in 5 Step

Niche marketing is a hype these days, but actually it's nothing new. It's been around for years, only we didn't call it niche marketing. In the early online days, the credo was "do what you love and the money will follow". That has evaluated into more sophisticated strategies, where you first explore IF there's a market and whether that market you're about to enter is profitable.


How to Research a Profitable Niche Market

Determining a market niche is one of the most important decisions you will make. If you choose well, chances are great that you can make good money. If you choose poorly, then you will likely struggle. While you can take more time if you like to, most people find a market niche they can explore in as little as one day. And very often, people identify several while going through this process.

What is a niche?

Let's define a niche first, so we both know what we're talking about: A niche is just a tiny, (highly) specialized marketplace. A marketplace means that there's demand and supply. 

Why niche marketing? 
Many people ask me why niche marketing is so important. Well, there are several reasons:

1. Less Competition 
In general, the more specific your market is, the less competition you will experience. You can brand yourself as the expert as long as you deliver high quality information to your prospects. 

On the other hand you have to realize that competition isn't bad. A market without competition could be a very bad one, because others have tried already and found it unprofitable. So, a certain amount of competition is good. It proves that there is a large interest in what you have to offer. All you need to do is make your offer unique - and position it correctly. 

2. Hungry Buyers/Seekers
Many people, in fact almost everybody likes to collect and not just only stamps, postcards, miniatures or books. People collect ANYTHING! There's a demand and supply for anything. The greater the demand and the lower the supply, the more likely people want to pay for what they collect.

3. NO Large Corporations
Because niche markets are relatively small and require special knowledge, large corporations will often skip them. That means you don't have to compete with their million-dollars budgets. Big advantage. 

4. Do What You Like. 
IF you know something interesting and that also happen to be a profitable or in demand niche market, you can transform your hobby into your work. You do not necessarily have to know the topic yourself, maybe you know a great resource that will work with you.

Basically there are two ways to enter a niche: 
1. follow your passion (supply) or 
2. follow the money (demand). 

If you follow your passion it will be easy to develop content. Hey, you're the 'expert' and you do what you love. As long as you have a great interest and know more than "most" of your prospects, you'll be able to succeed. 

But you still have to find out if your passion is profitable! In other words: does your market spend money? And if you follow the money, financially you're already on the right track, but it will be more difficult for you to develop content. Oh yes, you can hire ghostwriters. But they aren't experts either, are they? In order to follow the money, you have to develop some ..... eh passion and specialized expertise for the niche otherwise you can't fill your site properly with high-value content. 

So, either way you have to do something extra. 
Sidenote: Here's where lots of people go wrong. They follow their passion and develop a product first and then go out to find the customers. That's exactly the wrong way to do this. You should look for a hungry market first and then, if all indicators are positive, develop a product. 

Now, knowing all this, let's redefine a niche. Let's define a ..... profitable niche! 
A profitable niche is a (highly) specialized marketplace with few competitors, high demand and money to pay for that demand.

That's what you have to find out. Actually you have to find out four things:  
1. do you like the niche topic, do you know about it, or do you have a great resource for it, or can you develop a passion for it?  
2. is there a market for your niche (demand)?  
3. if yes, does it have a lot of competition (supply)?  
4. is that market willing to pay money for information, solutions or products (profitable)? 

If you find a niche with lots of competitors, it's going to be very difficult to make profits from that market. On the other hand, if you find out that demand is too low, then maybe the niche is too small. Finally, if you think the niche is great, but there's nobody there who wants to pay for products, then you're niche isn't profitable. That's what happened to pets.com.

You want to avoid these situations at all cost.

So, what's selling, what's hot? Let's ... Find Your Niche Before we dive into this, be aware that the whole process described below is an estimate, not exact science. 

It's just to give you an idea about the possibilities in your niche market.

Step 1
The first step is a global approach. It all starts with picking an area you are passionate about or you can develop a passion for. If you already have a passion or expertise, search for it in the places below. If you don't have one, browse the places below until you find one that interests you. First, visit your local shopping malls, libraries, and bookstores. See what people buy there and what the trends are. Always look for bestsellers lists. Buy some well-known magazines. These places are markets and you can find a niche there. Keep your eyes open and watch for trends. You can do the same online. To get general ideas, you can visit: 

Lycos Top 50 -http://50.lycos.com
Yahoo! Buzz - http://buzz.yahoo.com
eBay Pulse - http://pulse.ebay.com

eBay is one of the best marketplaces online! Go to their home page and select a category that you may be interested in, using the topics you've gathered from looking at the previous sites. Drill down in there until you find a niche market. Then look for profitable sub-niches by then selecting a sub-category. 

The best chance for success is if you are as specific as possible with your niche selection. Take a note of how many people bid on items there and you may have discovered a profitable niche market. Also, check the largest stores as well to see what they're selling. There has to be a reason they are the largest stores. 

They must be doing something right. eBay also puts out a PDF report of their hottest categories each month, available at http://pages.ebay.com/sellercentral/hotitems.pdf. Just recently I found a very interesting topic, but I didn't do a thing with it. Know why? 

Cause I don't know squat about millinery! You should also try Amazon - http://www.amazon.com. Look at their bestsellers lists. Amazon is a great place to see what currently exists for any given subniche. Chances are, the more books there are written on the subject, the more that market spends on those topics. 

For example: First specify "Books" to search. Then enter your niche. If there's thousands of books, your niche is not targeted enough. It is too "mainstream." You should further narrow your search. Hang out on Message Boards and in Newsgroups! Just enter your topic of interest in the Google searchbox and add +"message board" (include the quotes) or +newsgroups. See what questions are asked and which topics are popular. 

Find out what problems need to be solved. Is there anything you like very much, something you know a lot about or someone else who knows a lot about a topic that you can ask for help? You see, if you're going online you have to provide tons of content! It's much easier to write about something you know about or like to do very much than on a topic you hate or don't know a thing about.

Step 2

Buyers used to go out for shopping, there simply was no alternative. Now, with the increase of both trust and quality that the Internet offers, they fall back into their natural pattern of being lazy. They don't want to leave the comfort of their own home, they want to buy from there and even have the goods delivered direct to their doorstep! They use search engines to find what they are looking for. 

Once in a search engine they use phrases or keywords to find what they are looking for. We want to know what phrases they use. If we can get OUR message in front of their eyeballs after typing in such a phrase, we DO have a potential customer, don't we? 

So, let's discover first what these buyers are searching for online. Let's do some keyword research. Go to https://adwords.google.com/select/KeywordToolExternal 
adwords kitchen appliances

Then, type in your keyword and enter the challenge response word.Click on Get Ideas. The next page doesn't show you exact numbers. 

Instead it shows trends, like this:
Research a Profitable Niche

Ok, lot's of possibilities here (The above is only part of the list). We still have to find out two things: do we have a lot of competition and is this a hungry market? Let's do that hungry market check right away, since we are here anyway. Just click the Selector to change the display view to Costs and Position Estimates. You have to fill in a daily budget. Set it to 100 dollars, so you will see the maximum bids. 

Next, click on Estimate Average CPC to order the bids from high to low. Now you can see what advertisers are willing to pay for these keywords! If they pay more than a dollar per click, you may have found a niche where people are willing to spend some money. Here are some other resources to check if people want to pay for your products.

To check on the companies that are bidding on your keywords in Google Adwords, use http://www.googspy.com. One relative newcomer as a research tool is Google Trends over at http://www.google.com/trends.

Step 3

Here are the main indicators about your competition.... Basically, if you sign up Google results Let's go to Google and enter the keyword phrase "kitchen appliances" (include the quotes ­ we're looking for the exact phrase!). At the top of the resulting page you'll see the number of pages that Google found for this keyphrase. At the time of this writing it said: Results 1 - 10 of about 2,020,000 for "kitchen appliances" Wow, that's a lot! It seems there's too much competition here. 

But wait..... Let's have a quick look at that results page. 

You see, the Title of a web page is, by far, the most important resource for search engines to find out what websites are all about. So .... Do you see many titles containing "kitchen appliances" (if the exact keyphrase is in the title, it is in bold)? If not, then most of these pages aren't optimized for this keyword. You may have a chance. Let's dig deeper into this. 

Do this: use the same search, only this time add the prefix: 'intitle:' (leave the single quote out). Now you get all the search results for your keyphrase that is included in the title of the pages. The number of results should be (a lot) less than in the first search you performed. This should give you a better indication of your chances of finding a great niche. 

Sidenote: If you find a great site with an affiliate program while browsing, jot down the URL for that site. You'll need it in step 
But we're not done yet! Let's dig into ...

PageRanks 

Click all the links on that page that have your keyword in the title (including plurals of your keyphrase) and see what their PageRanks are.

Tally the page rank of all the pages you opened with the keyword in the title and divide by the number of pages with the keyword in the title. That's the average PR of that SERP (Search Engine Result Page). Pagerank tells you how important these sites are according to Google. If most of them have a PR of 5 or lower, you may have a chance. 

PR 5 is already hard to beat; higher PageRanks means it's going to be much more difficult to be listed in the top 10. Sidenote: Actually PR isn't that important; inbound links are. Inbound links (or back links) are websites linking to the site you're looking at. You can see the number of backlinks for any site by clicking on the Google 

Toolbar and selecting backward links. Some have thousands or even tens of thousands of backlinks. Hard to beat! PageRank however, is a nice reflection of the number of backlinks.) Do this right now and put the results in a little table or spreadsheet. That will give you a good idea about your competition and the possibility of dominating your niche.

How to use your keyphrases

If you decide to build a website or a blog for the niche you've found, ideally you want to find 10 - 15 keyphrases that you can use as (sub)categories in your website/blog. From these keywords we have to select one as the name of our website; all others will be categories or directories within the site. 

Using the graphic above, you could decide to use the following phrases: ­ 
kitchen appliances ­ 
large kitchen appliances ­ 
antique kitchen appliances ­ 
blue kitchen appliances ­ 
copper kitchen appliances ­ 
cuisinart kitchen appliances 
- and so on.

All keywords tie in neatly. Now we can use the keyphrases we've found to make a good decision for our domain name. What you ideally want is as many of your keyphrases as possible in your domain name. On the other hand, the domain name should be one that is memorable and usable. Make it easy to remember and easy to use (avoid having domain names that would be difficult for people to spell). 

We could decide to name our website 'kitchen-appliances.com' or 'bestkitchen-appliances.com' or 'kitchen-appliances-reviews.com'. You get the idea. Just check to see which ones are available. Our website would then have several directories named after the other keyphrases and in these directories we write our high-value content pages. It would look something like this: 
Research a Profitable Niche

Your domain name is the first tier and your main keyphrases make up the second tier. You fill the second tier pages with keyword rich content AND with links to the very specific third tier pages. These are keyword rich pages that should list high in search engines and link back to your second tier pages where you can sell or promote products. Because it's a niche and these keyphrases are so closely related, you have a very good chance to score high in the search engines for these keyphrases. Which means... Free Traffic!

Step 4

In step 3, you've written down possible partners in your niche who have a great site and an affiliate program that you can promote at your site. Basically, if you sign up for an affiliate program you'll get a special URL that you can use to send your visitors over to the merchant who does the selling part for you and reward you with a commission if any of your visitors buy. 

You see, the latest hype is to develop niche websites only to make money using Google Adsense. Since we're aiming for high-quality content websites, you're site has a huge chance to be accepted by Google Adsense. And the way we're setting up our websites is a perfect way to attract the best targeted advertising. 

So yes, you can and even should apply Adsense on your site. I can wholeheartedly recommend that. But I do not recommend putting all your eggs in one basket. Since you want to build a high quality content website, why not also promote great affiliate programs to make some money? Using your content you can pre-sell your visitors and use your affiliate link to send them over to the merchant. You may want to dig deeper into this. 

Use your keyphrase in the Google searchbox and add +"affiliate program" (include the quotes) or +affiliate. See what comes up. Explore the affiliate programs. Also keep an eye open for information or products that you can buy or use to make your own product. That's the most profitable way to make money with your niche site. So, there you have your niche!

Step 5

Now, get a domain name and build your site. You can use a great, search engine optimized template to build your websites or you can use a blog. Now you're ready to make $100 a day. You can do so using Adsense or other paid advertising methods. See how much each site brings in and setup another one until you reach the $100 a day goal. Be sure however, that you always publish high quality content, otherwise the search engines will penalize you sooner than you can create your next site. 

I've done that and it works. But here's another approach which can be much more profitable.

Create valuable content describing problems in the niche and how your visitors can solve them. Gently weave in an affiliate link, not obtrusive, but useful. In the long term, this will even generate more money than paid advertising.  And if you select your affiliate programs carefully, concentrating on those that pay recurring commissions or use lifetime cookies, then you're building a real business. 

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