How To Pick A Profitable Niche (For Marketing Agencies)
Choosing the right niche to operate in can become a make or break decision for a Marketing Agency and that's why the question “How To Pick a Profitable Niche?” is one of the most important questions you can ever ask.
These are the 12 main factors to consider when choosing your niche...
- How accessible and easy to reach is the target market?
- Is this market high ticket?
- Does this market support recurring billing?
- Can I add massive value to this market?
- Can I get a large result for small amount of work?
- What is the growth potential of the market?
- Do I understand the market I want to go into?
- Do I have any case studies or testimonials in this niche?
- How desperate is the market to get the outcome I offer?
- Is it possible to sub-niche?
- Can I go “Narrow And Deep”?
- Are prospects already spending on advertising?
So let's break these down one at a time and look at what we need to do and what are the characteristics of a great niche?
1. How accessible and easy to reach is the target market?
So the first step you want to consider when choosing a niche is how accessible is the market that you’re thinking of going into?
The last thing you want to do is to spend time, effort and money on building collateral around a particular niche only to find out that the decision makers are completely inaccessible.
When coming up with the niche idea the first step is to go to a site such as LinkedIn for example and perform some basic searchers to see how many decision making contacts are available.
Another way to do this would be to use the search feature within Lead Lantern to determine how many decision makers are available and how accessible they are.
A good example here would be Plastic Surgeons.
This potentially is a great niche, however there simply are not very many Plastic Surgeons, it can be quite difficult to reach them and there are a number of people going after them.
In this case you can see due to the lack of accessibility that this is not a good niche.
We only figure this out after some initial research.
Watch the short video below as an example of how you can research the accessibility of particular decision makers within a niche.
2. Is this niche High Ticket?
Criteria number 2 to consider is does this niche offer high ticket products or services?
It’s very unlikely a business is going to have a substantial advertising budget if they are offering low ticket products and services.
Ideally we are looking for businesses who are selling products and services that have $5k, $10k, $20k even $100,000 plus in sale value.
Some examples of this would be Personal Injury Lawyers who can receive in excess of $100,000 for a successful case, Dental Implant Dentists who can receive $25,000 + for implants, IT companies who can receive in excess of $100,000 for IT products or services.
These types of businesses want marketing services and have substantial budget to pay for it.
In contrast to this, let's look at a hairdresser.
When a business only receives $20 to $30 per transaction, then it becomes very difficult for them to see a positive return on investment (ROI) on marketing service, when as an agency, you’re charging $3k to $5k per month for the service.
3. Does this niche support Recurring Billing?
Along with a high ticket product or service, we’re also ideally looking for recurring billing from the potential client.
If we can find a niche where our prospective clients are selling a high ticket service that is billed every month, then we’re starting to get closer to a great niche.
An example of this would be Marketing Agencies.
A marketing agency is going to generally charge a high fee and this fee is going to occur monthly.
Another example of this might be Financial Planners. Financial Planners may charge several thousand dollars in monthly fees.
When a client in a prospective niche offers a high value, recurring billing product or service, the value they receive from a new client is massive.
The more value they receive...the better.
4. Can I add MASSIVE VALUE to this market?
The next question to ask yourself when considering a niche is “can I add massive value to this marketplace?”.
How much you’re revenue is ultimately going to generate depends 100% on how much value you deliver.
So obviously, the more value you’re able to deliver to a particular niche, the better it is for you.
Some questions to consider are “how much value can I add right now” and “how long will it take to where I can increase the levels of value that I'm able to deliver?”.
Ultimately how much income you earn will be in direct proportion to the amount of value that you deliver.
If you’re unable to deliver a large amount of value or it's going to take a long time to where you are able to deliver that value, this is severely going to restrict your earning potential.
Choose a niche where you know you can add value immediately or at the very least you will have the ability to learn how to add value quickly.
5. Can I get a LARGE result for SMALL amount of work?
Ideally when selecting a great niche you’re going to want to choose a niche where you're able to deliver a large amount of value for a small amount of work.
In other words, a small result for you equals a large result for your client!
We previously mentioned Dental Implant Dentists who can receive as much as $25,000 plus for one implant case.
In order for the Dentist to receive massive value from you, you only have to produce one new dental implant case per month.
The goal is to make it as easy as you can for yourself to succeed in your job in the eyes of your clients.
Choosing a niche where a small result from you, produces a large result for them, is a great way to do this.
In contrast to this, working with clients where a big result from you equals a relatively small result for them is a very bad idea.
This is why ideally we're looking for high ticket services on a recurring billing basis. It makes this task so much easier.
As I mentioned before with hairdressers you may produce 500 new haircuts at $20 each.
This requires a massive amount of work for you, however, that still equates to a relatively small result for them.
6. What is the GROWTH POTENTIAL of the market?
When selecting a great niche the next consideration is what is the growth potential of the market?
By this I mean is your prospective client able to grow with your success?
Let me provide an example to make this clear.
An insurance company has infinite ability to grow. If you're providing great leads, they are not going to tell you to stop because they don't have the capacity to receive any more leads.
They will take as many leads from you as you are able to produce.
There is infinite growth potential within that market.
A hairdresser on the other hand is not able to take all the leads you're able to produce, at some point they will become saturated and unable to handle any additional growth.
In this case, the more successful you are, the quicker your relationship with your client ends.
Clients will discontinue your service simply because you were too successful and they couldn't handle the results you produced!
7. Do You UNDERSTAND the Niche you want to go into?
This is critical and is the area that most people fail in when choosing a niche that would otherwise seem to be a good choice.
You have to have the ability to understand the niche you're looking at, or at least have the willingness to learn about it.
There is still room to compete in even the most competitive niches for this very reason.
A niche may seemingly have a lot of competition, but generally speaking, it has very few people that actually really, truly understand every aspect of that niche.
A good example of this is the IT space.
It has all of the elements and seemingly has all of the requirements of a good niche.
It's high ticket, generally recurring revenue, a small result for you equals a great result for them and so on.
For these reasons it’s a niche that a lot of people choose to go into.
Unfortunately they don't understand the products or services offered and they don't understand the needs of the prospective clients.
They’re also either unwilling or unable to learn these things.
For this reason they fail.
One of the keys to landing clients is speaking with authority on the problems that you are offering to solve.
An IT manager of a company will instantly know your level of knowledge on the topic, it can't be faked.
9 out of 10 people will simply not have the level of understanding to come across as authoritative.
Therefore, it's best to stick with a niche that you understand or that you're willing to take the time to understand at a very deep level.
8. Do You have any CASE STUDIES or testimonials in this niche?
This is not essential in choosing a niche but it's certainly very useful.
A question I always ask when helping people to choose is this: “what niches in the past have you had success in?”
Are there any niches where you’ve had a great case study or testimonials from the past that you can use to help land new clients?
It goes without saying that a case study or testimonial is going to be very beneficial in helping to bring new clients onboard in the future.
If it’s specific to the industry that you want to go into, then this is even better.
Obviously, if you're just starting out or you don't have any case studies or testimonials this is not relevant.
But if you’ve been established for a while, then looking into your history is always a great place to start when it comes to choosing a place to move to in the future
9. How DESPERATE is the market to get the outcome I offer?
How desperate is the market to get the outcome you offer is a very, very important question that is often overlooked.
The reason why it's so important is because the level of desperation for a solution to a problem will equate to how much a prospect is willing to pay for that solution.
Not only that, it will determine how quickly that prospect is willing to make a decision.
The only time anybody agrees to pay for a service is when they have a problem that they no longer believe they can solve themselves and the pain has become too large to live with anymore.
For example, offering a service where you collect monies owed to a business on their behalf is likely to be a far more desirable service than offering a service to generate new clients for that business.
Because the prospect is far more desperate to receive monies that are owed than he or she is to generate new business.
The prospect will be far more likely to agree to a service where you are collecting money on their behalf than the alternative of generating new clients on their behalf.
Desperation will generally produce better results than desire!
By choosing a niche where a high level of desperation is present, you will find it much easier to gain traction and growth.
10. Is it possible to SUB-NICHE?
The more sub-niche you can go the better results you're going to achieve.
A common mistake that most people make when choosing a niche is that they choose too broad of a niche and fail to sub-niche.
Let's look at plumbing as an example. Plumbing by itself is a very broad niche.
We are immediately able to reduce that into smaller sub niches, for example, residential and commercial plumbing.
Let's say we're going to go with commercial plumbing, we can again narrow this down even further into commercial HVAC for example.
We could even take it one step further and narrow it down to commercial refrigeration for restaurants.
By narrowing it down like this, it makes it very easy to present ourselves as an expert to a specific industry.
It’s much easier and much more believable to present ourselves as the industry expert for commercial refrigeration to the restaurant industry than it is to present ourselves as the industry expert to the plumbing industry.
If we're trying to generate plumbing clients who specialise in commercial refrigeration, then it’s going to be much much easier for us to land those clients by specialising in this way.
This brings us to my next point…
11. Can you go “NARROW AND DEEP”?
By this I mean we want to choose a niche that has a large number of those very specific niche businesses.
A good example to demonstrate this would be the legal profession. Law is too broad, we need to sub niche down from that.
Let's say we are going to specialise in immigration law.
Immigration law is a very narrow topic compared to the broad topic of law and it is also very deep.
We’re going to have no problem finding a very deep pool of immigration lawyers who would like our services.
So as you can see immigration law is narrow and deep.
Alternatively we could make the mistake of going narrow and shallow.
An example of this could be hearing aid repair.
It's certainly a very narrow topic but the pool of prospects is probably just too shallow for this to work.
12. Are they already spending on advertising?
The final question to ask yourself when evaluating “is this a good niche or not?” is are businesses within this niche already spending on advertising?
There are a number of industries where it’s standard practice for the business to advertise.
And then there are businesses where advertising is less of a standard practice.
A good example of this would be Dental.
Generally speaking, it's understood that the dental practices will spend 10% of their revenue on marketing and advertising.
This means that if you’re offering marketing services and you hope to work with dental practices, you don't have to convince them that they need to be spending money on advertising, they already understand this.
A good way to check this is by simply going to Google, typing in the type of business in the search and seeing what comes up in the ads.
It’s clearly much easier to sell advertising into a business that already advertises than it is to sell advertising to a business that currently does not advertise.
It's also worth checking local newspapers and media to see which businesses are consistently advertising.
Quite often there’s a pattern that emerges.
If you start to see the same type of business advertising over and over again, then this is a good indication that this is an industry that spends money on advertising.
If you're thinking about going into a niche and you can't find any examples of those businesses advertising anywhere, then this is a good indication that this type of business generally doesn't like to advertise.
So those are the 12 criteria that are used to evaluate how good a potential niche is.
Do all of those criteria have to be met?
No, it's just a guide, use your own judgement and decide for yourself.
The list is also not exhaustive and there are certainly other criteria that you can use when evaluating how to choose a niche.
But this is a good starting place and this will certainly give you a solid framework to move forward.