How to Choose a Niche for Your Agency. Pros and Cons

We live in a fast-changing world where something unimaginable happens every day. And the COVID-19 pandemic has added even more uncertainty to our already unpredictable lives. So it makes sense that industries that were relevant yesterday might begin to suffer losses today or even cease to exist tomorrow.  

Undoubtedly, this situation affects digital marketing agencies as well. But don’t worry — the chances of agencies not being needed tomorrow are slim to none! Nevertheless, it’s harder for those who want to open their own digital marketing agency than ever to choose a niche. How can you be sure that another pandemic won’t cause your industry to any longer be profitable in a month? That’s why today, in this article, we decided to cover the topic of how to choose a niche and what the pros and cons are. So read on!

Reasons why you should choose a niche

Some of you may have wondered at this point — why pick a niche at all rather than working with everyone? There are a number of reasons for that. First of all, of course, it will be much easier for you to set up processes and find clients there. In addition, it is obvious that there are so many digital agencies these days, and it is impossible to take the leading position among all of them at once. But it is pretty possible to become a leader in a particular industry!

Other less obvious advantages also include:

• Roadmap. If you’re working with everyone in all niches, it’s very easy to stop understanding what you’re even doing and where your agency is going. You’ll have a more challenging time convincing clients why it’s more profitable to work with you than your competitors because you won’t have enough clear examples. Having a niche will allow you to look for specific pain points of potential clients and make your services more personalized.
• Understanding your competitors. Choosing a specific niche allows you to start really analyzing and understanding your competitors, as well as their services, advantages, and disadvantages. It will be easier for you to convince clients why your approach is unique and more profitable.
• You will be able to anticipate external risks and possible impacts. Having a niche allows you to adapt quickly to them and position yourself better.
• Having a niche gives you growth opportunities. You can better understand your target audience, your objectives, and your services. Thus, you get the chance to develop faster and more steadily while having a high ROI.

So it’s pretty obvious that choosing a niche is a very profitable and correct decision. Now let’s figure out how to choose it.

How to choose a niche

The short answer to this question is to do very meticulous research. 

In truth, however, there are simply no shortcuts in this case. Therefore, it is worth going consistently, using the following five points. 

1. Brainstorm

Start by brainstorming with a couple of trusted people you want to work with who have enough experience and knowledge. The goal of this process is to bring in new ideas. But these people will also help you conduct your research. 

First of all, determine what your strengths and weaknesses are. Then make a list of niches that you could quickly enter, given your strengths. Are you good at running PPC campaigns? Do you have a successful track record in SMM? All of this will be a plus for you!

2. Get to know your competitors 

At the end of the previous step, you already have a list of niches that suit your skills. And this has both pros and cons. The cons are that, most likely, almost all the niches you selected are already too “crowded,” and there is stiff competition. Pros are that further research will go much faster since your competitors have already conducted all possible market research. So fill your boots!

Start analyzing each selected niche and research your competitors. Compare the company’s size, staff, rates, social media, and how they position themselves in the mass media.

Carefully analyze the information you receive. A large staff and more than one office of your competitor’s agency may mean that it is indeed profitable. Audiences on social media can tell you if there is interest in this niche and how great it is. If your competitors have many good reviews, then we have bad news for you — the competition will be really tough. 

With this kind of analysis, you can cross off niches that are “overcrowded” or unsuitable for you. This will leave you with a few options for niches where you have a real chance of success.

3. Conduct an industry research

Now we’re going to contradict the previous point a bit: you shouldn’t completely trust your competitors — they may not be the best indicators of the situation in a given niche. 

It could be anything. Maybe they bought subscribers and likes from special agencies. Maybe the reviews were left by employees or the management themselves — with fake accounts. That’s why it’s a perfect time to analyze the industry at this point. Essentially, you take the information you’ve already found and check it against more reliable sources. 

Don’t forget to analyze the findings. Will you be able to keep up in a niche like this? Do you have enough budget? Will you be able to stay trendy? Discuss your findings with the group of trusted people mentioned above. At this point, your list of niches will shrink again.

4. Get to know your potential client 

“Creating avatar” is not only about James Cameron’s creative process but also about analyzing your potential client. You have to understand your market segment and its content — the people you have to deal with. So before you choose a niche, it’s worth getting to know them. This is where the avatar of your ideal client comes in handy. It’s important to remember: we’re not talking about your target audience here, but about an individual — your ideal client. And when you speak to your audience, it is in them that your words resonate in the first place. 

5. Conduct a survey among small businesses

There’s not much left to do! By now, you have undoubtedly identified the niches that will be most profitable and successful for you. You also know in person not only your competitors but also your potential customers. Now it’s just a matter of getting the feedback that will confirm or refute your decision.

Whether you succeed or your niche breaks you depends on the quality of your research, your skills, and, of course, your luck. So you have to be sure that your services are relevant, in demand, and that someone will want to buy them at all. Based on your customer avatar research, make a list of 12-15 questions for your target audience. Their purpose is to validate your niche choice. If you are going to open a digital marketing agency for social media marketing for accountants, your questions, for example, might look like this:

• Have you heard about the benefits of having a corporate social media profile?
• Have you ever considered creating one?
• Would you like to get a new influx of customers through, for example, Facebook?

Post your questions on social media or send them out to former clients. Even cold calls will work. Your goal is to get as many responses as possible from people who fit the title of your ideal customer. 

Analyze the responses. If you see that people want these services and can afford them, you’ve come to the finish line. Your niche has been found.

Pros and cons of choosing a niche

Of course, by this point, it is clear that finding your niche has many advantages. But there are also disadvantages. Let’s define them.

Pros

• Fast and confident launching in the market. After choosing a niche, you already have a marketing strategy, you know your client and their needs, and networking and attracting new clients only gets easier.
• Easier selling. When you work in one niche, it’s much easier to confirm and improve your reputation. It’s also easier for you to generate leads and prove to them why you’re their best option. 
• Targeted marketing and high conversions. You can create more personalized content for different target audiences by addressing your customers’ pain points directly.

Cons

• Smaller market capitalization. Choosing a niche means a much smaller number of potential clients, as well as the risks of oversaturation of this market.
• The need for more in-depth expertise. If you have not had experience in a particular niche, you will have to earn it very quickly. 
• Fewer leads. Choosing a niche means that even if you are doing well now and the conversion is going great, you may soon reach its limit.

We have listed all the main pros and cons and covered the main steps. Now it’s up to you. You can look for your niche or work for several industries at once. The main thing is to do quality research! If you want some more detailed instructions and help from experienced practitioners, check out our webinar on this topic.