In his book “Start Small, Stay Small: A Developer’s Guide to Launching a Startup”, Rob Walling advocates the idea of finding a niche market within which to operate your startup. He argues that building a product that caters perfectly to a small market is a much better business proposition for most self-funded startup founders than a generic product aimed at the mass market, for many reasons.
Your chances of success when building a product focused on a specific niche are much greater. Although it seems at first glance that you will be hugely restricting your potential revenue by focusing on a small subset, this is rarely actually the case.
A product that perfectly fulfils the needs of the population of a niche gives you a great chance to build an outstanding best-in-market product, one which your users will find indispensable and happily pay for. Add this to the fact that it is generally possible to charge more for niche products, and it is clear to see that it is definitely an idea worth exploring.
Marketing a mass-market product is a hugely time-consuming and expensive affair, typically with meagre sales conversion rates. If your product aims at the mass market, you can be sure that you will need to spend a considerable amount of time and a large percentage of any funding you may have on marketing to make an impression, particularly if there are already similar products available to consumers.
Marketing to a niche is much, much cheaper than marketing to a mass audience. Your marketing campaign can be as simple as running a few cheap ads on the websites that the current population of your chosen niche frequent or running articles in trade magazines. Pay-per-click advertisements can be targeted at keywords that are not only much cheaper to buy but also much more likely to result in your adverts being shown to people with a high chance of conversion into paying customers.
Members of niche markets talk to each other. Whether that is through face-to-face conversations at trade shows and conventions or the use of internet forums, the news of an excellent new product perfectly aligned to their particular area of interest can spread like wildfire, solely through word of mouth. This word of mouth dissemination by trusted friends, colleagues and family members is the essence of viral marketing.
In their book "Inbound Marketing: Attract, Engage, and Delight Customers Online", the co-founders of HubSpot, Brian Halligan and Dharmesh Shah advocate an “inbound” approach to marketing. The “inbound marketing” approach prescribes the use of relevant, useful and, in most cases, free content to attract paying customers. This kind of marketing is much easier to achieve when targeting a niche audience.
As an exercise, try to think of a niche market, perhaps a hobby you enjoy, and write down the titles of five articles or blog posts that would appeal to that audience. Now try to do the same but aimed at the global populace. Which do you think will have the best conversion rates? I have a theory that this is the reason that clickbait has become so prevalent, particularly in social media. The only way to appeal to everyone is to go for the lowest common denominator.
Finally, it's always important to consider the competition. Your competitors within a niche market will almost always be smaller companies. If a market is worth less than $100m or so annually, very large corporations simply won’t be interested. They operate at such a huge scale that new ventures below this level of revenue simply never get prioritised. They can make much more money for similar amounts of effort elsewhere, simply by the fact that they have huge cash reserves to make initial investments and a ready-made brand and market share.
Some of the links to products that I have provided in this article are affiliate links. This means that the supplier may pay me a small amount of money if you use the link. This will have absolutely no impact on the amount you pay.