As you plan to set up your online business, it is imperative to invest your time in a feasibility study. This will entail researching about the niche you want to get into, the wider industry and your competitors. An important consideration will be to determine the keywords you will use to optimize your website for the search engines – this will help your target market to find your online business.
HOW BIG IS THE NICHE?
You want to set out in a niche that will allow for growth and profitability. The market on the Internet is wide and competitive. It is important to determine the niche that you want to specialize in and the products and services you want to offer. You will find that some niches are narrow while others are wide and allow you to target a larger audience. It would be a fallacy to assume that a wider niche is better than a narrower one or vice-versa. The suitability of the niche will depend on your product offering. The most vital factor is the availability of a market. Narrower niches mean that your products could be exclusive to a highly specific market. A wider niche allows you to sell to the mass market or to a less exclusive market.
Establishing your niche requires you to spot a real need and a way to fulfill that need. If there is no real need, you might not have a feasible market or the niche might be too small to make economic sense for your business. As you establish your niche you might want to:
• Find a product that has adequate demand but is scarce
• Work with a market that you understand and have some experience with
• Work with a niche that has higher margins and positive returns
• Select a niche that has room for expansion
HOW COMPETITIVE IS THE NICHE?
To determine how competitive a specific niche is, you need to establish whether you have a true market for the product. It also entails an assessment of your competitors. Some factors to consider in determining the viability and competitiveness of your niche are:
Customer Analysis: first, you want to determine your target market; consider demographic factors such as their age, gender, income level and the ethnic group that is likely to buy your products. Consider if there are specific times that the customers are more likely to do businesses with you and whether this will be sustainable for your business. You should also establish the reasons that would make a customer buy your product. Is it because the product is exclusive, luxurious, and scarce? And why would the customer opt to make a purchase from an online store?
Research Your Competitors: their offering and pricing as well as the number of visitors that come to their websites. This will allow you to weigh the level of competition you will face in your chosen niche. You might also want to assess the competitors based on keywords and links to their site. Who ranks at the top for certain keywords? How long have they been in business? Are there any opportunities for business-to-business collaboration?
Determine your market size: once you determine your ideal customer, you need to ascertain the number of people who will actually constitute your prospective market base. To determine the size of the niche you might want to look at statistics about your target market; of course, the data should be relevant to your market.
Determine how much you will sell your product for: you can check how much your competitors are selling similar products for. You can then set the selling price depending on the way your product compares with that of competitors, for example in terms of quality or packaging. You can increase the price or subtract it to make the product more competitive in the prevailing market.
Assess your keywords: if you already established that, you have a feasible market, assess how the search terms that describe your product show up in the search engines. Take about four of your main keywords and using Google’s Keyword Planner, assess how frequently web users apply these keywords to find your product. This will help you determine the amount of traffic as well as the click through rate to expect for your website.
HOW PROFITABLE IS THE NICHE?
Here are some factors to consider when establishing the profitability of your niche:
The demand: is there a real need for the product or service you are offering? There should be adequate demand for the product to keep your business profitable. Do a keyword search to see if people are querying the search engines for a solution to a specific problem. A good rule of thumb is to get at least two percent of site visitors to become buying customers.
The competition: the amount of competition will affect your profits. Is there someone else supplying a similar product? The keyword analysis mentioned previously should help you determine the number of players in the market. Then, figure out how you can differentiate your product to make it more competitive.
The traffic: it is not enough that people click through to your website. What you are looking for are high quality visitors who are looking to invest their money on a product or services. You might also want to look if your competitors are offering your product for free because if they are, people are less likely to buy your premium product.
The customer lifetime value: What type of customer does the niche have? Will your business attract high value customers who are looking to do business for the long term? Does the niche only allow for one-time customers or does it have space to convert one-time buyers to long term and loyal customers.
IS THERE POTENTIAL FOR BACK-END PRODUCTS?
A back-end product is the type of product you sell to your customer after they have bought something. Back-end products can serve to boost profits more than the initial purchase. In fact, back-end products can sometimes make it worthwhile to give away for free the initial product purchased. Finding a niche that allows for back-end product can be very lucrative for your online business. You will be able to sell additional products that the customer actually needs because the back-end product is related to the initial product purchased.