Proven Techniques for Finding a Profitable Niche: Part 1

Written by:  Moe Muise, Guest Blogger

This is the first post in a two-part series.

If you’re new to Internet marketing, you’ve probably spent some time staring blankly at your monitor and thinking, “what do I promote?”

In this article I’m going to describe an approach to choosing profitable niches that has allowed me to generate a full-time income online – an approach that is the opposite of what most gurus recommend, but in my opinion is the best way to build a long-term online business.

Why You Should NOT Pick Products to Promote

Focusing on products first is a mistake that many newbie marketers make. While it sounds like a logical approach, it’s a bit like picking out your furniture before building your house. Shouldn’t you build the house and paint the walls before settling on that lime green sofa?

Here are the biggest problems with trying to build a business by picking products – any product can easily become uncompetitive (if “new and improved” competitors come onto the market), untrendy (hello, Atkins diet!) or obsolete (CD player, anyone?).

In contrast to products, the vast majority of niches will never become uncompetitive, untrendy or obsolete. And with so many more people getting into Internet marketing in 2010, the competition to make money online is ratcheting up. That’s why choosing the right niche from the start is so important. By choosing the right niche you’ll not only start making money quicker, but you’ll gain a bit of confidence. This confidence will help you weather the ups and downs that come with running any kind of business.

What Exactly is a Niche?

Put simply, a niche is a distinct segment of a market. In other words, it’s one slice of a large pie.

You can slice a niche out of a larger market in many different ways. A niche market can be comprised of:

  • A demographic group (e.g. women between the ages of 45-55 who have a college degree)
  • A psychographic group (“psychographics” consists of people’s activities, interests, and opinions – e.g. golfers, democrats, backpackers, etc.)
  • Particular needs (e.g. people with back problems)

All of the groups mentioned above are examples niche audiences. Unlike customers who are looking for a particular product, niche audiences have multiple needs, desires, challenges, and pain points. Do you see the opportunity here?

The Ultimate Way to Build a Sustainable Online Business: Focus on a Niche Audience

If you focus on serving the needs of a whole niche audience, you won’t get burned when a product you’re promoting disappears or becomes uncompetitive – you can simply find another product to promote!

Just think about it for a minute: niches have multiple needs, but products don’t.

So if you start your Internet marketing business by focusing on the “new mother” niche (for example), you can attack that market by first making a list of all the needs that new moms have:

  • Baby clothes
  • Parenting ebooks
  • Weight loss programs
  • Time management advice
  • Yoga gear
  • Sleep aids (if you’re a parent of young kids, you understand this one!)
  • Kids’ books and videos
  • Marriage help (the arrival of kids often strains marriages)

And when you build a network of sites that serve a niche audience (which is what I’ve done), you can cross-promote your websites, getting an even bigger bang for your promotional buck. This works even when your sites are in different product categories. Why? Because even though your sites are in different product categories, they’re targeting the range of needs of the same niche audience.

When approaching a niche market, look at it this way: Your job is to serve as a guide for your niche, helping them solve their problems. Kind of like a guide who helps climbers reach the top of a mountain (also known as a “sherpa”).

And what will you get in return for your role as “niche sherpa”? Well, if you do it right, you’ll get a thriving online niche business!

Why Clickbank Affiliates (Not Just Vendors) Need to Do Niche Research

If you plan to make IM your full-time income, you need to treat it like a business by reinvesting your profits, leveraging your time through outsourced staff, and, most importantly, developing an intimate understanding of your audience – their pain points, challenges, needs, and aspirations. In sum, you need to develop an intimate understanding of your audience.

At this point you might be thinking, “I’m an affiliate. I don’t have customers. So why do I need to understand my niche audience?”

The answer is simple. While you might not have direct customers, you do need to attract prospects to your merchant’s sales page. Attracting prospects usually involves writing ads for PPC campaigns, crafting copy for your review pages and writing many other pieces of copy that try to get your prospects’ attention and compel them to click.

So where do you get the information that you can use to write good copy? Like a sculptor, you need something to work with – a piece of clay to mold a masterpiece. Your clay will be the tidbits of information that you collect during your niche audience research!

How to Find Niche Audiences That Will be Profitable for the Long-Term

As I mentioned above, the key to a sustainable online business is to choose a niche audience. But how do you know if a niche audience will continue to have needs, problems and challenges that you can serve and make money from for years?

In truth, all niche audiences have problems, and will continue to have new problems for years to come. But there are audiences that are better than others in terms of profitability.

Below I’ve listed my core criteria for a profitable niche audience, and I follow that up with a description of the audience I focus on in my business, and why it’s a good one.

Core Criteria for a Profitable Niche Audience:

1) Online in large numbers. You can have a tiny audience (1,000 for example) and still have a solid business. But you’ll have to sell higher-priced items to those people. Internet marketing is a numbers game, so the bigger the audience the better.

2) Actively looking for solutions to their problems. Ideally, you want an audience that is actively searching the Internet for a solution to a problem (or more than one problem).

3) Have a strong emotional need for solutions to their problems. When you’re looking for a niche to serve, it’s best to choose one that not only has problems, but that is desperate for solutions to those problems. Now, that might seem like a tall order. It might seem like only some purchases are driven by emotion. But the reality is that emotion plays a much larger role in our lives than we think – including in most of our purchasing decisions.

4) Are willing to spend money to solve their problems. While all niche audiences have challenges in their lives, not all groups are able (or willing) to lay out the bucks to make their problems go away. Here’s an example: The first website I ever started was a directory of government grants for homeowners. For some reason, that site attracted a lot of senior citizens, many of whom were on pensions. The best I could do with that site was monetize it with Adsense – because my audience for that site just wasn’t willing (or able) to spend money on their problems!

5) Are underserved by the market. Believe it or not, there are some niche audiences online that aren’t well-served by marketers. If you think about your own experience searching online, this makes sense. How many times have you gone online to find something and came up empty-handed?

There’s one key reason why marketers ignore some audiences, and it has to do with one criterion that a lot of Internet marketers use to assess a market: the number of pay-per-click ads. Many IM gurus say that you shouldn’t go into a market that has few PPC advertisers, because few ads means there’s no money to be made in that market. That’s foolish logic, in my opinion, and I currently make auto-pilot profits serving a niche audience where I’m often the only advertiser. The audience? Farmers (more on that audience below).

A great example of a niche audience that fills all of the criteria above is overweight, male baby boomers. This is the main audience that I target in my business.

Why is this such a great niche? Let’s put them through my five niche filters:

  • Online in large numbers. Baby boomers are not only a huge market, but are growing in number every year. They’re a significant force online now (although a lot Internet marketers ignore them), and as the Web becomes more easily accessible through more and more outlets – like the iPhone and iPad – even more will pile on.
  • Actively looking for solutions to their problems. The explosion of niche forums has provided an outlet for any group to get together with like-minded people.
  • Have a strong emotional need for solutions to their problems. Baby boomers are like anyone else – they want to look good, and feel good, in front of their family and friends. And as they age, some of their problems grow. Take health, for example. As boomers age they have more health ailments. And few problems are more emotionally-draining than health problems, particularly when a person gets into their 50’s and 60’s.
  • Are willing to spend money to solve their problems. We all know that financial wealth increases as we get older. While many teenagers don’t have two nickels to rub together, baby boomers have been accumulating wealth for decades. And despite the recent economic downturn, there are still millions of boomers who have a substantial nest egg built up from years in the workforce. Need proof that boomers are willing to spend money on their problems? Sales of Viagra were $466 million in 2009!
  • Are underserved by the market. As I mentioned above, a lot of marketers (with the exception of the makers of Viagra) ignore the above-50 group. I think this is because of the obsession with youth we have in Western countries. Everyone is chasing the “fountain of youth,” and being old is considered bad. Well, that’s great news for those of us who focus on those neglected baby boomers.

So what’s an example of a niche that doesn’t fit my criteria? Here’s another example from my own experience: farmers. In my early days online, I did a lot of research in niches with low cost-per-click (CPC) keywords. My rationale was that if I could find an unmet need in a low CPC market, my advertising costs would be minimal, and when I launched a product my profits would be higher.

Eventually my research led me to develop an information product on how to raise a particular kind of farm animal (yes, an info product on raising a farm animal!). To this day, that product brings in a steady $1,000 per month in auto-pilot profits. And because it’s such an obscure niche, I’m able to advertise on the “big three” search engines at a very low CPC.

So if my campaign is making a profit and it’s on auto-pilot, why do I consider it a loser? Because farmers are a relatively small audience and, in my experience, their disposable income is limited. In a nutshell, the “farmer” niche violates two of my core criteria: they are not online in large numbers, and they are not willing (or able) to spend.

If I wanted to scale my per-per-click campaigns for this product, it would be difficult – because there simply aren’t many people searching for a solution each month. A final reason I would not get into this kind of niche again is that there aren’t many affiliate products that I can pitch to farmers after they’ve gotten on my list. What do you sell to men who spend a lot of time with livestock – dating offers?

For Part 2 of this series, click here.

About the Author

Moe Muise, M.A., is a Clickbank vendor and affiliate. He blogs at www.KeywordsBlogger.com. Moe has 10 years experience in niche research, and has been perfecting his online research techniques for the past four years. To download your copy of Moe’s FREE 60-page, step-by-step niche research report, visit his blog at www.KeywordsBlogger.com.