Niche Market vs Mass Market: Which Is Better For Starting a Business in 2021?
Jan 26 2021
14 min read
14 min read
This article should address the argument for niche markets vs mass markets, heavily leaning toward niche markets, but without exaggeration or lack of acknowledgment that the mass market is a viable option as well. This piece should help reiterate the advantages of having a well-researched niche, and the disadvantages of not.
Table of Contents
When you’re first looking to start your online business, choosing the right target market is difficult.
The instinct is often to try to target the general public declaring, “my product is for everyone.”
But that’s usually a recipe for failure.
Of course, the rewards for succeeding are massive, but it’s almost impossible to beat out established multi-billion dollar competitors.
On the other hand, you can also target a niche audience that’s too narrow and end up only selling a few products per year.
In this article, we’ll compare which is more effective niche market vs mass market and help you find the right balance for your new online business, product, or website.
What’s the Difference Between a Niche Market and a Mass Market?
The difference between a niche market and a mass-market is scale and specificity.
A mass-market is a market for goods (products) or services with virtually endless potential customers from various backgrounds. It’s typically something that “everyone needs.” Think of toothpaste, bread, or even mobile phones.
On the other hand, a niche market is a subset of a larger market-focused on satisfying the needs of specific target groups of consumers. It could be all-natural or whitening toothpaste, gluten-free bread, or easy-to-use smartphones for seniors.
On the surface, it seems like all the money is in mass-market products because you have so many more potential customers.
But that’s not always the case.
Is Bigger Always Better?
At first, it seems like owning a larger piece of the market is the road to the highest profits.
But that’s not necessarily the case. Apple’s iPhone is a clear example of this.
Apple was never trying to market the iPhone as a mass-market product. It was always a kind of fashion statement. A phone, sure, but also a message that you “get it” — whatever “it” means to the individual consumer.
Even as its market share diminishes with new Chinese manufacturers growing, Apple is still making the majority of the profit in the entire mobile phone industry.
Both Samsung and Huawei hold larger pieces of the smartphone market than Apple does at this point. But Apple doesn’t sell regular old smartphones. Apple sells the iPhone. The company has created its own niche within the larger mobile phone market.
The result: 66% profit share on only 14% market share. That’s unheard of.
That’s the power of Apple’s brand loyalty.
A large section of iPhone users aren’t interested in buying any smartphone. They specifically want an iPhone.
As a result, Apple can command higher prices and spend a much lower percentage of its revenues on marketing.
It’s an extreme example on a large scale, but it’s a similar story with local businesses or even blogs.
An all-organic bakery can charge higher prices and doesn’t compete for customers with all the other bakeries in the area. It markets specifically to consumers who care enough about organic products to choose it automatically.
A food blog focused on a specific diet like keto has a much higher chance of resonating with an audience.
Think about it.
If you’re looking for a specific recipe on Google, you’re not going to start following a general “cooking” blog after seeing their recipe.
But if you’re vegan and want more easy recipes, chances are high you’ll follow Vegan 8 after stumbling upon their website.
It’s right there in the header graphic, vegan recipes with just 8 ingredients. You’ll instantly know if it’s up your alley or not.
Of course, generalist food blogs live on due to scale and the power of authority on Google. It’s a longer road to get there, sure. But once you’ve established yourself, it can be more lucrative.
There’s also a compromise, to start small and go big later. Niche websites and businesses often “go mainstream” after they’ve got the budget and experience to expand to new markets.
So which is the right way to go for your business?
Let’s dive deeper into the pros and cons of each option.
Mass Market Pros and Cons
Are you thinking about targeting a mass-market audience with your business? Let’s take a closer look at the pros and cons of starting a business targeting a large market.
Massive Earnings Potential, If You Can Get Past the Competition
If you can get past the competition, there’s a much higher earnings ceiling for mass-market businesses.
Just think of how much more money Starbucks generates than your local coffee shop focused on single-origin beans.
Even for a blog, the potential is massive if you can cross over into the mainstream. Martin Lawrence sold his personal finance blog Money Saving Expert for £87m ($116m+) in 2012.
It had become the leading resource on personal finance advice in the UK, which made it a valuable asset for companies in the same space.
But getting past your competition is no easy task.
For example, if you want to get a blog post ranked for the “how to save money” keyword, Ahrefs estimates that you need backlinks from over 200 separate websites.
That’s the roadblock that stops most generalist blogs and businesses from getting started. Finding a foothold can be hard when the competition is so well-established already.
That’s the double-edged sword of the mass market.
Limited Brand Loyalty Powered by Ads
By definition, a mass-market product or blog cannot differentiate itself by its category alone. You can only differentiate “normal” toothpaste through ads and marketing.
Blogs and websites that go too broad have the same problem. You’d need to stand out from the sheer power of SEO expertise or content volume, rather than people identifying with your brand immediately.
If you’re trying to write for everyone, people might find the content helpful, but they won’t identify with it.
The same goes for a brand. A brand for everyone is a brand for nobody (until they’re convinced otherwise).
That means you’ll struggle to develop a social media following or email list, even if you can generate organic search traffic from specific keywords.
Think about the uphill battle of trying to market a new soda or soft drink. Instead, we have since seen the rise of healthier, more natural beverages, like coconut water, kombucha, and pre-prepared smoothies.
Lose on Price, Lose Your Customers
More often than not, price is the deciding factor for customers choosing mass market-products.
Store brands now make up over 19.3% of all products sold in stores.
Is it because they spend more money on ads? Store brands rarely ever advertise, and brand products often pay stores for better placements in the store.
So no, it’s not the advertising. Store brands are growing because they beat brand products on price. That’s the only reason some consumers need when they go shopping.
Walmart’s “Great Value” store brand is the perfect example. They don’t even try to hide it. It’s right there in the name. The name itself is admitting that “people buy our store brand products because they’re cheaper.”
If you want to start an online store, this drive for the cheapest product is a significant challenge. Scale drives running costs down, so competing on price in the general marketplace for a small vendor is commercial suicide.
As an affiliate, this is less of a concern as you can typically just promote any new products that are winning on price. But then, you have to beat industry-leading magazines and authority sites for traffic.
Either way, you’re in a pickle.
Niche Market Pros and Cons
Is your budget and experience better suited to starting a niche business? Let’s explore the pros and cons of a niche market to find out.
Easier to Break Through but Lower Earnings Potential
The competition is a lot more manageable in niche markets. Remember how you’d need over 200 links even to start ranking for the “how to save money” search term?
If you narrow it down to saving money in college, it’s a different story.
Ahrefs estimates you need around 30 links to capture a spot on the first page of search results. One of the top 10 SERPs with only 2 backlinks is still on the front page of Google.
It would also be easier to get direct access to your target customers. You could hold workshops and free seminars at colleges all about saving and start building your brand that way.
But the traffic potential isn’t on the same scale. With 1,400 global searches, you have 40 times fewer potential visitors per month.
After all, college students only represent a small fraction of everyone interested in saving money.
The good news is that you don’t have to stay a niche business forever. Once you’ve established yourself in a particular niche, you can expand beyond it to capitalize on your success.
In 2019, the vegan food blog “Minimalist Baker” transitioned to a general food blog after amassing a large audience and a high domain rating.
The tagline is now “Simple Recipes That Make You Feel Good.” Today, the site has hundreds of recipes with chicken, beef, and other animal products.
It has officially rebranded itself.
Earn Attention and Brand Loyalty Just By Standing Out
(Source: Seth Godin’s Purple Cow Ebook)
Being different won’t just garner attention but also brand loyalty. It’s almost impossible to stand out when you have to compete on price (or content volume) with other mass-market brands.
The first kombucha producer didn’t need to spend 1000s of dollars on advertising to start getting sales. They offered a unique product. They were the only “purple cow” in a beverage fridge of ordinary cattle.
Don’t be afraid to be different. It’s a lot easier to create a unique brand or unique content when you’re diving deep into a single niche.
Trends Play a Significant Role in Effective Niche Marketing Success or Failure
Some niche markets have a stable demand as subsections of a larger mass market.
But most niches are susceptible to changes in trends, both good and bad. For example, the demand for gluten-free products and recipes has exploded over the past few years.
The original niche players have likely experienced miraculous growth over the past decade. Just look at the Google Trends graph for the “gluten-free diet” keyword. The search volume has exploded. The demand is almost 50 times higher than it used to be back in 2004.
On the other side of the spectrum, we have the hoverboard. Back in 2014, some may have thought that it was a great niche business idea. After all, the trend was still on its way up.
But in less than a year, the demand all but disappeared.
You see some generic made-in-China models for sales during the holiday season each year, but it never established itself as a significant niche in the transportation market.
Niche trends are volatile, so you need to be careful.
Before you commit a lot of time and money to a niche business, you need to make sure that it’ll be around for long enough to earn you a decent return on that investment.
Why Niche Markets Are More Suitable for Online Businesses
If you’re going to start an online business, choosing an effective niche market will make things a lot easier for you.
Young People are Using Products and Brands to Signal Their Identity
More and more consumers are spending their money to express who they are. That statement also rings true for blogs and websites.
It’s not enough to offer a generic product or advice to your potential customers anymore. They’re looking for something that helps them prove their identity.
We have previously covered how the Nerd Fitness founder differentiated his fitness blog by targeting an audience traditionally not interested in fitness.
(Source: Nerd Fitness)
It gave self-labeled nerds and geeks the excuse they needed to exercise without changing their identity.
There are examples of this in every industry and niche market. Back in the 1980s, Pepsi was putting pressure on Coke with the “New Generation” campaign. They branded themselves as a hip drink for the youth.
Instead of only kids drinking it, people who wanted to make a statement (to themselves as much as anyone else) about feeling young started drinking.
Pepsi finally started to outsell Coke by essentially positioning itself as a new niche product; “cola for young people.” Sure, multi-million-dollar mass marketing was involved, but the message made the difference.
Who does your target market wish they were?
How can you position your brand or blog to help them express who they want to be?
If you can answer these questions, and the niche audience is large enough, you can do a lot of other things wrong and still succeed.
Niche Products Are More Shareable on Social Media
With the digital revolution, more and more word of mouth marketing is happening online.
Getting shared on social media is, in some ways, the new “recommended by friends or family.”
A product or site people actually relate to will amplify every marketing strategy or campaign you choose to implement.
Niche products tend to get shared more actively than others because they’re tied to people’s identities differently.
OluKai is a company whose flagship product is virtually a fancy, more comfortable version of the flip flop.
It may not sound like much on paper, but because of the good arch support, people who struggle with flat feet or foot pain have developed a strong relationship with the product.
People are actively discussing and sharing these shoes on Twitter because of their good arch support.
(Source: @jeremyjudkins Twitter)
Sure, people also tweet up storms about the newest Yeezys, but unless you can bag a popstar or sports star, good luck entering the signature sneakers market.
You Can Start Driving Targeted Traffic with Organic Search With Minimal Effort
When you’re not targeting high-volume keywords that every leading industry magazine or eCommerce platform has got on lock, you can actually start ranking on the first page of Google results.
For example, leather flip flops is a commercial keyword with over 2,700 monthly searches. But the competition is so low you could conquer the rankings with only a handful of backlinks.
If you write a high-quality piece of content, and it gets picked up by one or two industry blogs, you could start driving highly-targeted potential customers to your site in a few months.
For comparison, the broader flip flops keyword is quite competitive, demanding over 100 backlinks to even dream of breaking into the top 10 results.
Good luck achieving those kinds of numbers without an SEO team or other digital marketing expertise.
The volume is higher, but the product price is also lower in general, and there are a ton more generic brands to compete with.
That’s the essence of an effective niche marketing strategy. You aim for the smaller markets that the “big dogs” leave alone.
When it comes to making waves online, it’s definitely better to be a big fish in a small pond.
Consumers Don’t Remember Just Another Product or Blog
For your blog, authority site, eCommerce store, or product to stick in someone’s mind, there needs to be something different about it.
If you tried selling another cola-flavored soda in 2020, one of the biggest hurdles would be just getting consumers to remember you.
However, if you positioned it as the first organic cola or the first aspartame-free light cola, you have a chance to be first.
If your product is first in a new niche or category, it’s instantly more memorable than “just another cola.”
In the book, the 22 Immutable Laws of Marketing, Al Ries and Jack Trout highlight this marketing commandment.
Many breweries tried and failed to knock Budweiser off its pedestal. They couldn’t even earn a significant chunk of the market.
But Heineken established a big market in the US by being the first to import beer, despite being more expensive. It didn’t directly compete with Budweiser as just another beer.
No, Heineken was an imported beer. That simple categorical distinction immediately made it appeal to Americans as something new.
To this day, Heineken is the second-largest beer company in the world, only second to Anheuser-Busch, who produces Budweiser, and Bud Light (the first light beer, which is now the top-selling beer in the US).
With effective niche marketing, you can make your site, store, or product the first in the minds of your target market and help them remember and choose your brand, or revisit your site or store.
Let’s take a look at a smaller-scale example of efficient niche marketing online. Canceled Plans candles markets “relatable scented candles” targeting an introverted audience with a seriously tongue-in-cheek product line.
Take a look at some of these names:
Canceled plans candle (flagship product)
It’s fine, I’m a fine candle
Student loans candle
These candles aren’t sold by scent. They target a specific form of anxiety or stress. And it has proven to be a powerful differentiator.
With its positioning and spot-on branding for the target market (introverts with social anxiety and money to spend), the company can get away with charging $33 per candle. That’s a mile off the $5-8 price tag of store brands and even certain consumer brands.
Don’t try to be just another brand. Invent a new category. Break the mold, and you’ll attract a consumer base a lot faster.
You Need To Take Your Time When Researching Your First Niche
The last thing you want to do is just jump into a niche without taking the time to research it first. You need to methodically investigate the demand, competition, available products, and more before you make the leap.
You Could Waste Months on a Niche That’s Too Narrow or Competitive
A single keyword with a search volume of 2,000 per month isn’t enough to start a new niche business online.
Make sure you identify a total traffic potential of at least ten thousand searches per month from attainable keywords.
If you’re using Ahrefs or a similar tool for keyword research, you can explore the “keyword ideas” section when exploring individual keywords.
You want to find at least 20+ keywords with volumes in the thousands or high hundreds before you dedicate yourself to creating a business around a niche topic.
You can be the most skilled marketer with the best marketing campaign in history, but if you go too narrow, you won’t even be able to break even.
There are some exceptions where the niche is centered around expensive luxury products, or most traffic potential is social, not search. Fashion and interior design come to mind.
On the flip side, you can also aim for a niche that’s simply too competitive. Do thorough keyword research, and explore multiple social media platforms for every niche.
You don’t want to get caught unprepared after having already started your business.
It May Is Impossible to Monetize Traffic Effectively
If you rush into a niche, you could end up working hard for months or years, start to see traffic, but not have the ability to reap the benefits.
For example, a celebrity gossip blog that only focuses on KPop idols might attract massive traffic. But there may not be a clear path to monetizing any of that attention or traffic effectively.
When you’re researching niches, pay attention to the CPC as you explore related keywords.
If a single click costs several dollars, that’s a good indication there are plenty of opportunities to monetize the traffic with affiliate offers or ads.
Typically, that means that the keyword implies “commercial intent” AKA, that those users are close to making a purchase.
It can also mean that a single product sale is worth a lot of money, so even though the intent to buy isn’t there, the traffic is still worth a lot.
You should also examine commercial keywords and see if companies are using Google Shopping ads to advertise products.
For example, try a product category name like “hunting belt” from your hunting gear store or hunting-focused blog.
If you see independent niche stores advertising, like in this example, that’s typically a good sign.
If Amazon also has a dedicated subcategory for it, that means there’s at least a healthy base level of commercial interest.
More Competition Than Ever
Thanks to developments over the past year, there are more people than ever interested in starting online businesses.
Just look at Google Trends. Even after the recent dip, there are still significantly more people searching for information than usual in December.
That means there are a lot of competitors popping up in all kinds of different niches and markets.
There might be up-and-comers that you won’t notice when you just do a Google search. So explore relevant hashtags on Twitter, Instagram, and TikTok to see if you’re not overlooking someone.
You don’t need to run away from minor competitors, but it helps to know how they’re positioning their brand. Make sure you take your time when analyzing the competition in your prospective niche.
If you’re ready to jump in, start with our step-by-step guide to finding a profitable niche.
Mass-market products or sites have higher earnings potential but are harder to establish in 2021, and profit margins are lower.
It’s easier to resonate with an audience and build true brand loyalty with a Niche site or product because it connects with the consumer’s identity.
Do your research and don’t be afraid to be original (if the volume or potential is there) when deciding on your brand.
When bootstrapping a new business, it’s virtually impossible to break into any kind of mass-market from scratch.
Targeting a niche market is the best strategy whether you’re starting a blog or creating a digital or physical product.
But that doesn’t mean your business has to stay narrow and small forever. Eventually, like many niche marketing success stories before you, you can leverage the success to expand your brand into the broader market.
Niche Market vs Mass Market - FAQs
Is Apple a mass or niche market?
It may seem like Apple makes smartphones and other electronic devices for general consumers, but they have carved out a niche for themselves within the larger mass market.
The large majority of Apple consumers are used to iOS and don’t shop around for new phones when they come out. They’re just waiting for the next iPhone. In a sense, the company is in a niche market it created itself.
What is a niche market with an example?
A niche market is a subcategory of a larger consumer market, like gluten-free bread within the bread market).
It targets a subsection of consumers within a broader marketplace based on their unique preferences or needs.
Why are prices higher in niche markets?
Prices in niche markets are higher because it costs more per item to manufacture a lower volume of products. Plus, companies can charge more for specialty products.
Since it’s a smaller marketplace, there’s not the same race to the bottom to try to win the largest piece. Most brands and stores maintain healthy profit margins to make up for the lower volume.
What is the advantage of a niche market?
The main advantage of a niche market is that you can build a brand without a multi-million dollar budget by using smart positioning and elbow-grease-heavy digital marketing tactics like SEO and content marketing.
What is the biggest niche market?
It’s hard to single out a single biggest niche market at any time as it relies on trends and many other factors, but one of the leading niche markets in 2021 is the Keto diet.
The ketogenic diet is a niche within the weight loss and fitness market or industry. With diet books, BCAA supplements, and digital ketone meters, the niche is exploding with products and money at the moment.
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