The importance of niche markets

Don’t try to solve all the problems in the world for everyone. SAP does it. Microsoft does it. They are elephants. And you, tiny little startup mouse, you shouldn’t. Don’t compete with elephants. You should lazer focus. Focus on a little group of targeted people, willing to pay a lot of money for your targeted solution. That’s what we call a niche market. You should lazer focus on a niche market.

Why? Why fish in a little lake? Why not fish in the big ocean where the big money is?

Niche markets have less competition

All the big strong fishermen go fish in the ocean, where the big fishes are. You are a startup. Go fish in your little lake. There is much less competition in niche markets. You can be easily number 1 in a small market. Especially, you want to avoid going in direct competition with the elephants that have tons of money for marketing, an army of developers and the best designers in the world. They make generic products that target everything and everyone. Like MS Office, or like generic ERP systems. And there is your chance to stand out from the crowd. You are focussing on one particular group of people. You can leave out the general product features (they make the generic software messy in any way), and you can add specific features that your niche market is screaming for. Within a niche market, you can become the #1, the reference. Don’t worry, elephants will not start competing with you in your niche. Those markets are too small for them. They are too greedy to go in a low revenue niche market.

Niche markets are much more easy and cheaper to market

Did you already think about the following: if you build a product that solves every problem in this world for everyone, then how will you pitch your product? How will you sell it? How will you market it? How will you bring on new customers? Quite difficult.

Within a niche, things get more easy. You can find and target your audience. You know where they are, what they do, and how to reach them. Targeting dentists? Try to go do conferences for dentists. Targeting lawyers? Try to get a list of all email addresses / telephone numbers of all lawyers in your town/state/region. That’s achievable.

Moreover, you can’t only reach them more easy, you can also pitch more easy. Your messages, your communication, your blog and your company name can be oriented towards them. While people out of your target market will not care about anything you do, people within your niche market will care a lot! They realize that you are there to solve their specific problems. You are not building just any CRM, you are building a CRM for dentists. You are not building a project management tool, but you are building a PM tool only for construction companies. With their specific wish-list of features. And without the generic things that make the software more difficult to use. It will not be difficult to convince them that your product is better for them then the generic tools out there. You have a pitch, a sales argument, an advantage over the generic products out there.

Niche markets are willing to pay you a lot of money

So, you have been building something exclusively for the 5000 people of type ABC in this world, that is solving a burning pain that only they have in their specific type of business? Congrats, you now have 5000 people that are willing to pay you a lot of money. Why? Because there is just one solution in this world that does exactly what they need! There are lots of other so-so-generic solutions, but only one that really does what they need. With their features, their vocabulary, supporting their kind of business. You are an expert in solving their pain. And they are willing to pay you for that, much more then for a generic so-so solution.

Word of mouth can go fast within niche markets

Last year, a big Belgian Renault car dealer contacted our web and mobile software agency to solve one of their biggest administration pains. They grew a lot over the last 10 years, and wanted to automate a big part of their administration. There was no software on the market for this, since the specific administration problems they have, are only for bigger Renault car dealers. Microsoft, Dell, Oracle or SAP are not interested in this market, it’s way too small for them.

So, we carefully listened to their needs, and wrote a very specific piece of online software, automating lots of their administration. This software saves them 2 weeks of work per month.

Today, one year later, 3 other dealers are using the same software. They contacted us. Word did spread. One month from now, we are asked to come presenting our “Renault Car Dealer Niche Software” (we don’t have a name for it yet!), to a Renault Car Dealer meeting with the 25 biggest dealers in Belgium. They all know and talk about this software, even before we did any single marketing or sales.

Why did that happen? Since we solved a very specific problem, for a very specific market, that is too small for the SAP’s, Oracles and Googles of this world. We don’t have to pitch our software or explain what it does. In 2 words, dealers know what the software is about, and realize that our software can win them 2 weeks of work per month. Some dealers really wanted to kiss us, “finally, a solution for this pain in the ass administration” you almost hear them say.

Since we solve a burning pain in a niche market, we don’t have any troubles finding clients. They find us.

What is your niche? Can you describe your market? Can you identify your clients? If the answer is “everyone”, then please go back to the drawing board. You really really need a niche.

Author: Pieter Eerlings

http://www.linkedin.com/in/pietere http://www.last.fm/user/pietereerlings

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