How to Find a Profitable Market Niche

Shortly after I first started working online I became a member of an Internet Marketing membership site. One of the main players in the forums there was Travis Sago (of BumMarketing) who had a simple rule people should follow if they wanted to succeed online:

1) Find a starving crowd.

2) Find out what they want to eat.

3) Feed it to them

I would add an extra step between 2 and 3:

2.a) Validate it

Easy to say, but what exactly does it mean..?

Let's assume that you've already worked out what industry you're targetting.

Within that industry you need to find a niche that you can dominate. Here are some steps you can follow:

1) Find a starving crowd.

This refers to finding a market niche, and here are some ways to do that.

1.a ) Join Forums:

There are thousands of forums online, covering pretty much any subject you can think of. Go to Google and do a search for forums relating to the industry you've picked.

You'll need to spend some time assessing forums that are worthwhile - there are thousands of forums online, but only a minority of them will be worth your time and effort.

They'll be the ones with a large, active membership, where a reasonable proportion of the posts have a lot of replies, where rules relating to forum behaviour are politely but firmly enforced and where activity is current.

When you find and join a good forum you need to set about establishing credibility and trust for yourself - which you can do by contributing to the community with valuable information.

1.b) Off-line niche hunting:

As with so many aspects of running an online business - don't limit yourself to online activities and resources. Go off line. And that applies to market research too.

Bookstores are a great way to identify profitable market niches: if there's an offline magazine targeting a niche you're interested in, the likelihood is that it's a potentially profitable niche.

2) Find out what they want to eat:

As you come to know the forum you will begin to see a thread of frequently asked questions emerging. As an example, in one of the forums in which I participate new members are frequently asking for recommendations about the best free autoresponder service.

This was so obviously an area that people new to marketing online were interested in that it prompted me to write a recent blog post on it.

Another way to identify what people are searching for is to check out the most searched-for items on eBay.

eBay is the biggest online marketplace and people who make searches on eBay are people who are actively looking for something - they're ready to buy.

A great starting point for finding out what people are searching for on eBay is this index of eBay searches:

http://pulse.ebay.com/index/

Once you identify something that's being searched for regularly on eBay or from the forums, or from your off-line research, you can then go to the next step:

2.a) Validate it:

Here's a way to validate a niche that looks interesting:

Go back to Google and type in a search for your niche term ('free autoresponder services', for example). See how many results come back. This is the number of pages that appear to answer the search query you entered - and these are probably going to be your competition.

Next you should check out the number of searches per month that are made for your search term.

There are several applications available that will give you both these answers and give you ratios of searches to results, competitive information, etc.

But you can save yourself the money by checking out the search results in Google and Yahoo, and using the Google Adwords Keyword Tool: https://adwords.google.com/select/KeywordToolExternal (free) to get an indication of the number of searches per month.

Yahoo also had a publicly available keyword tool, called the Overture Keyword Selector Tool, but it appears to have been taken offline for the moment.

I understand that Yahoo is upgrading it, so it would be worth checking for it periodically, because the old version had more functionality and enabled you to get more granular results than Adwords - so it was more helpful.

Anyway - you're looking for a high number of searches and a low number of results. This would indicate that there's a lot of interest in the niche (high number of searches) and it's not particularly competitive (low number of results).

But beware: a low number of results could also indicate that the niche is not profitable!

So how to find out if the niche is profitable?

Check the sponsored results on the right hand side of the search results pages.

Too few would indicate that the niche is not profitable and too many would suggest that there's too much competition.

I look for between 1 - 3 pages (11 - 30 ads) of sponsored results. To me this would indicate a niche that's potentially profitable and not too competitive.

You then need to monitor these ads for some time. If the niche is not profitable the majority of the ads will not be displaid for long. If they're still being displaid after 10-20 days the niche is potentially profitable!

3) Feed it to them

Once you've found out what your starving crowd wants to eat, and validated that it's a potentially profitable niche, you need to feed it to them - which is the easiest step of all.

You can either develop your own product or identify an affiliate product that meets the needs you've identified, and then set up your marketing campaign.

So, to summarise:

1) Find a starving crowd: join forums relevant to your industry, study what people are looking for on eBay and see what regular off-line magazines are published to help identify your niche.

2) Find out what they want to eat: become active in the forums and look out for questions that are asked frequently, look for very targeted searches on eBay or magazines focused on a tiny niche within your market.

2.a) Validate your niche: check out the number of searches and results in a month, check out the sponsored ads and see whether there's a regularly published off line magazine focused on your niche.

3) Feed it to them: Develop your product or find an affiliate product and develop your marketing campaign.