Niche marketing is a term that gets kicked around a lot, but what does it really mean and how can it put more money into your pocket? Keep reading to find out.

A niche market is a smaller, very focused group of people who share a common set of interests and needs. These people are looking for a very specific product or service.

So niche marketing is about finding these tightly focused groups of people, understanding what they want, and selling it to them. This superb strategy will decrease the amount of competition you encounter and great increase your chances of converting cash sales.

Most people, when asked about a niche market will respond with a lot of general topics. For instance many entrepreneurs seem to think horse training, dog grooming, alternative energy, healthcare, and online business are niches.

These areas are all very broad, highly competitive market, not niches. On the other hand, training injured horses to compensate for their bad leg, stylish hair bows made especially for black toy poodles, a guide on the best solar powered flashlight, tips on how to care for men with a particular type of dementia, and software that helps you build a better shopping cart are all examples of possible niche products/services.

I say possible because while these are all very tightly focused concepts, they are not real niche markets until you know for certain a group of people is actively looking to spend money on them. Getting focused in only one part of the niche marketing formula; the second and equally critical piece of the puzzle is in identifying your customers.

In fact the process of finding a niche market actually begins with the search for your potential customers. Most people make the mistake of finding what they believe to be a great product first, and then looking for someone to sell this product to. This is the fast-track to disappointment. You always need to find the people you'll market to first, and then worry about the exact product you'll offer.

You can start with a general idea, like a hobby or a skill you have. But before you begin to build a business around this idea you absolutely must be sure there are ample people online who are interested in your idea.

There are a number of good keyword research utilities online that can help you begin your quest for the right niche market. In essence a keyword research tool will tell you what terms people are searching for on engines like Google and Yahoo, and in many cases you can even find out how frequently the popular terms are being queried!

Once you know what terms are being searched, you'll want to see for yourself what searchers are finding on the major engines when they enter these terms. Are there thousands of sites selling products and services related to these searches, or are there only a handful of sites offering any information related to the keywords you've found?

In the ideal scenario you'll find a group of related keywords that are searched on quite a bit, and then confirm that very few (or no) sites can be found to provide a solution to the searcher's problem. This qualifies as a legitimate niche marketing opportunity.

The research phase is the most important step in the process of launching an online business. And it's the step most people skimp on or avoid altogether.

Sadly, this is why most people flop miserably with their online venture. They never bother to find out if anyone else cares about their idea, and they end up developing a product nobody wants.

Now that you understand the basics of what niche marketing is you can avoid making this costly mistake. Find your tightly focused group of potential customers, find out what it is they want/need, and then get to work figuring out how you'll be the person to offer them what they are looking for!