At this point you have figured out your niche and how big the market is. Should you give yourself the green light and make it your next business project? Should you start pouring in your time, effort and resources into building a business that targets this niche?
To decide whether or not you should go for this business project, you will need to test the profitability of your niche.You may have gotten a glimpse of how profitable your niche may be when you were doing your initial research. When you test the profitability of your niche, you get to crunch some numbers and determine once and for all if targeting this niche will make you good money.
Again, there are a number of strategies that you can use to check the profitability of your niche. Once more you will need to turn to keyword research and checking existing products.
You will also need to estimate the possible cost of starting a pay-per-click campaign on the niche. And absolutely must have strategy is to communicate with your audience and find out directly what they exactly want, so that you do not need to do any hard selling afterwards and money just comes in.
Keyword research is a task that you must sometimes repeat when you are scouting out new niches to target for your business. When you do keyword research with the aim of testing for profitability, what you are looking for is the daily search volume for a particular keyword.
For the sake of examples, I have been using the keyword term "tennis elbow". If you will recall, the monthly global search volume that Google AdWords posted for "tennis elbow" is approximately 368,000. Divide that by 30 and you will have an estimated 12,267 searches daily.
That figure, however, is too broad. To make sure that the niche will be profitable for you and that you are truly targeting the market that you want with laser-fine accuracy, you will want a daily search figure that is somewhere between 300 to 1,700. This means the market exists and the competition may not be that tough.
So, in the case of "tennis elbow," let me refine it a bit further and use the keywords "tennis elbow treatment." Here is what Google AdWords has to say for these keywords:
You will see that "tennis elbow treatment" gets approximately 22,200 searches every month. Divide that by 30 and you will get 740 daily searches approximately. That is a decent figure enough to play with.
Product research will be invaluable for you when checking out the profitability of your niche. It will tell you what products are available out there that is targeting your niche and if you can sell these products through affiliate programs.
Or if you do not want to join an affiliate program that sells these products, product research will give you a gauge if you can deliver your very own product that is similar in quality or perhaps better than what is already available out there.
One great place to do product research is Amazon.com. Here is what turned up on the website when I did a search for "tennis elbow treatment":
As you can see from the image, Amazon.com says there are 70 products related to the keyword – “tennis elbow treatments”. This definitely shows that there is a market for such products; it also shows that there are people who are indeed buying these products.
While there are free ways to market your business, such as article marketing or social networking, pay-per-click (PPC) campaigns are more effective and generates results much more quickly. They are also a perfect test tool in order to learn and understand the market.
From the profitability stand point PPC is a great indicator how valuable your niche is. For example, if you will build a website in particular niche, you can predict how much money you can make as advertising revenue. This will give you a sense of potential value of your website in a long term perspective.
However, you also need to be ready to compete in the market, so from the costs per click you can predict how much money you will need to invest in order to get targeted leads from the PPC campaign. It basically gives you the value of 1 single lead in your market.
There are many tools out there that you can use to estimate the cost of a PPC campaign. One of these tools is SpyFU. It can give you a list of your competitors, the cost-per-click of a possible PPC campaign, number of clicks per day and the overall cost-per-day of the campaign.
For the term "tennis elbow treatment," here is what SpyFu came up with:
As you can see, the cost-per-click for "tennis elbow treatment" is not particularly high, but there is good number of advertisers, so it might be a good niche market.
Speaking of competitors, here is the list of top competitors that you will have to deal with when you use the term "tennis elbow treatment," according to SpyFU:
From this chart alone you can find out what kind of products there people represent, and it will give you overall better understanding about the market. In the first three strategies that we discussed on how to check the profitability of your niche, we looked at third parties like Amazon.com and SpyFU for what they have to say about our niche and our possible competitors in that niche.
You can certainly rely on the information that you can get from these third parties. However, nothing beats the kind of information that you can get from your audience themselves.
The best way to do this is to make a squeeze page and build an opt-in list through that squeeze page. Your opt-in list will give you a subscriber base that will tell you exactly how big your market is and what are the main concerns that you can solve with your own product.
And then, you feed that list with an auto-responder series of emails. The autoresponder series will help you find out exactly how interested they will be in your product, if ever you decide to offer one.
In our tennis elbow treatment example, you can give them different tips on how to take care of their tennis elbow, how to find treatment for it, or how to prevent it.
At some point, you can insert a market survey in your emailed series to find out exactly what your subscribers want. The survey can have questions like this:
1. What is your age?
2. Do you suffer from tennis elbow or lateral epicondylitis?
3. Does your condition prevent you from functioning normally on a dayto-day basis? Is it affecting the quality of your life?
4. Have you sought treatment for your tennis elbow? Is it successful? How successful was it?
5. Are you willing to try a form of treatment that is all-natural or homeopathic?
6. What is your biggest concern regarding your tennis elbow? If you have built your list correct way, you will get a good response to your survey and this is how you will know what kind of product to offer in the market.
The answers that you will find on this questionnaire will help you determine just how interested your target audience is in a product that will help solve their problems.
Testing the profitability of your niche is a very crucial part of defining what niche to target when you go into business. In this way, you determine for sure whether the niche you have chosen is truly worth sinking your time, effort and resources into.