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When you’re running a service business looking to expand its customer base, your first instinct might be to cast a wider net. It makes sense, because you want to introduce your service to the largest possible audience.
But this isn’t always the best solution. As a service provider, there are definite downsides in trying to go too broad. It waters down your brand identity, weakens your marketing, and makes it much harder to stand out from your competition.
That’s where targeting a niche market can help. You become an authority, making branding and marketing much easier. “Niching down,” that is, focusing on a narrower market segment, can actually bring in many more clients for your business.
Whether you’re a solo entrepreneur researching your ideal audience, a freelancer looking for new ways to grow, or a well-established business owner refining your offerings, you should know how to define your niche market. The following step-by-step framework will help you choose a potential niche, research the market, and validate every business decision.
What is a niche service offering?
In the context of service businesses, what do we mean by a niche service offering? That’s when you target a specific subset of the wider market. The goal of providing a niche service is to meet the needs of a narrow market segment rather than try to appeal to everyone.
For example, you might be a freelancer working as a web designer. That job description is pretty broad, putting you in direct competition with every other web designer out there. But if you market yourself as a web designer for health and wellness brands, you can pull ahead of the rest of the pack. You’re an expert in the field, and customers with a similar brand are more likely to take a look at what your business offers.
Sometimes one word makes all the difference. It might be hard to distinguish yourself if you offer a general service like dog grooming. But if you market yourself as a mobile dog groomer, you will catch the eye of customers who don’t mind paying a premium for you to bring your business to them.
There are three different types of niches that you can use to distinguish your business:
Industry niche: This means you focus on a specialized segment of the broader market. For example, you might be a social media manager for nonprofits or a cybersecurity expert working with early stage startups.
Audience niche: Simply put, this refers to the core customers that you are trying to attract. An audience niche can be fairly general (for example, women business owners) or quite specific (millennials in the Northeast who are transitioning to a new career).
Problem-based niche: What exactly are you helping your customers accomplish? What solution are you providing? It might be converting a business to renewable energy or reducing the costs of human resources.
Why finding your niche matters for growth
One of the biggest challenges for service-oriented businesses is that customer acquisition costs have been rising for years. According to Forbes, it costs 60% more to find a new customer today than it did five years ago.
That means businesses of all sizes are encountering a similar problem: They might not earn back their acquisition costs if a customer only makes a single purchase. To ensure your company’s growth, you need customers that will be with you for the long haul. That’s why finding your niche is so important.
The right niche can lead you to repeat customers that are dedicated to your services. Here are some of the benefits:
Clearer messaging: Instead of trying to appeal to everyone, you can hone your message so that it attracts the types of customers who need your service.
Higher level of expertise: When you focus on one segment of the market, customers perceive you as an expert in that specific niche. This also means you can often charge more for your services.
Increased loyalty: Niche markets often cater to passionate communities where members like to spread the word about service providers that address their specific needs. Expect more referrals once you find your niche.
How to find your niche
The first question you’ll probably have is how to find profitable niches. Many established service businesses start by taking a long, hard look at their existing customers. These are the customers that they know best, have worked with the longest, and have proved to be extremely loyal.
Review past projects and client results: Take a look at your most successful projects and look for similarities. Don’t forget to analyze how clients responded to your work.
Spot patterns in what you do best: If your most glowing reviews regularly come from a narrow range of projects, that might point you toward the right niche.
Dig into the demographics: Once you take a look at the types of clients who already use your services, you can start to narrow down your offerings.
But startups and other early stage businesses might not have enough information about their customers to help in their decision-making process. That’s why we’ve included this easy-to-follow process on how to research a niche market.
Step 1: Audit your skills, experience, and interests
Your passion for your work is important, but it shouldn’t be the only factor that goes into choosing a niche market. Start off with an assessment of everything that you are bringing to the table.
Identify your hard and soft skills: Make a list of all the skills you might have, separating them into hard skills (your technical know-how) and soft skills (your interpersonal abilities).
Uncover your areas of expertise: Even if you haven’t run your own business for long, you should consider the experience you’ve racked up with previous jobs and projects.
Consider your special advantages: Do you have certification in your area of expertise? Connections in the industry? These put you ahead of the competition.
Step 2: Research market demand
Do a deep dive into your industry, focusing on finding underserved areas. Networking groups in your area of expertise are a great place to start. Then think about the following:
Research keywords: Use SEO tools to uncover high-volume, low-competition keywords customers are searching. More specific terms—”eco-friendly dry cleaning” rather than “laundry”—tend to find an audience more easily.
Identify search intent: Are potential customers just doing research, or are they ready to hire you? Look for words and phrases like “open hours” and “in my area” in online searches.
Scan online forums: Read platforms like Reddit and Quora where people post questions about your type of service. That way you can make sure your business is solving the right problems.
Step 3: Evaluate the competition
Who else is vying for the attention of your customers? What do they do well, and not so well? Knowing your competition is another key to finding the right niche.
Identify the competition: Make a list of all your competitors, both direct (those in your industry that are providing similar services) and indirect (those in different industries that might be competing for many of the same customers).
Look for positioning gaps: Keep an eye out for areas where your competition may not be measuring up. For example, you might discover that while most cleaning services in your area focus on commercial clients, customers repeatedly ask for similar services for the home.
Assess their reputations: Check out what customers say about your competition on sites like Yelp. If they get low ratings in a certain area, this might be a niche you could explore.
Step 4: Validate before you commit
Once you identify a potential niche market, you need to make sure it has a good chance of being profitable. Make sure to validate any ideas before you put them into place.
Confirm the market: Squarespace’s analytics tools can help you get a sense of what search keywords are already sending people to your site. And a general keyword search can also gauge demand for a new niche.
Test offers with clients: Your current customers are one of your most reliable sources of information. Offer them niche services at a free or discounted rate, then ask them for feedback.
Run small ad campaigns: The best idea is worthless if customers aren’t willing to pay for it. Consider running targeted ads for your niche service to gauge whether customers will be interested.
Refining and evolving your niche over time
Discovering your niche doesn’t mean the process is over. To keep ahead of the competition, you’ve got to continually analyze the data you’re collecting about your customers.
You can leverage the data provided by a Squarespace site. Use the client data you’ve gathered on things like page views, conversion rates, and purchase histories to guide the evolution of your niche service. Don’t forget to ask customers for their feedback on what you could be doing better. Automate your emails so you request feedback after purchases or other interactions.
Sooner or later you’ll probably want to expand your offerings. Think about providing different levels of service (called vertical expansion) within your existing niche or adding complementary services (horizontal expansion) that might also appeal to your customers.
As you expand, it’s essential that you stay focused on the things that you do best. Make sure that your core customers continue to feel that they won't get better service elsewhere.
Your first step toward a niche service
The decision to niche down your service offering isn’t an easy one. But focusing on a narrower market segment can be the key to being considered an expert in your field, attracting more attention in the marketplace, and expanding your customer base. The results—stronger brand authority, improved SEO, higher-quality leads, and possibly higher rates—are hard to ignore.
The good news is that none of this is guesswork. Learning how to find your niche market is all about using the data that you are already collecting about your business through your Squarespace website.
Finding your niche service offering doesn’t need to be accomplished all at once. Take your first step by making a list of the hard and soft skills you bring to the table and then move on from there.