Article
While it might be tempting, or falsely secure, to focus your business attention on a broad audience, many successful companies have found that the best path to success is through focus on niche markets. In this article we will explore reasons to focus on smaller groups of customers, how to do it, and see examples of successful brands.
Here are the reasons:
Okay, so far so good but how to focus on a niche market? Basically, there are 3 starting steps that are the same for every company.
First things first, you need to identify your niche that is aligned with what your company can deliver. There are 3 main categories to use for defining your target group:
If you have a functioning product or service and you need to segment your existing consumer base, you can include behavioral factors as well. These include buying behavior, such as product usage, brand loyalty, frequency of purchases, or the stage of the buyer's journey.
Next, you need to assess the size and growth potential of your chosen niche. By doing this you should answer the question: Is it large enough to support your business?
Finally, you need to research your direct competitors in the niche. Also, you should try to find out if your potential customers are using different means to solve the problems you are trying to solve for them with your offering. In the end, you need to know the strengths, weaknesses, and areas where they are not creating enough value that customer need and want.
When you have your niche ready, you can start creating initial Buyer Personas. These are details you gathered in the previous steps that represent your ideal customer. You can even choose to create more than one depending if you need to segment your group into subgroups.
I said “initial” Buyer Personas because you will definitely uncover more insights as you move along. So, the next task is to go out and talk to your potential customers in the niche. This is usually done through surveys, interviews, and social listening. Apart from these tools, you can also rely on secondary research like industry reports, academic studies, and government publications.
The goal of this step is to understand your target niche in higher fidelity and uncovering what are their pain points, goals, and needs.
Now armed with insights you can start tailoring, or optimizing if you already have a live product or service, your offering. The goal is to align it closely with your niche’s specific requirements. This could involve design changes, adding new features or even removing some of them. Sometimes, there’s no need to change anything product-wise but you should just focus on sales and marketing. In other cases, having great customer support might be a way to go.
All in all, the end goal is to focus on solving the specific problems for your niche audience and position your company as the top-of-mind solution.
Square was founded by Jack Dorsey and Jim McKelvey in 2009 with a goal to provide an easy way to accept card payments. Although today Square has expanded its offering to include inventory management, payrolls, business analytics, and even loan programs for its customers, its initial success can be found in its laser focus on small merchants with a product called Square Reader.
Before Square Reader, small merchants were having difficulties accepting card payments due to costly POS systems, complicated lock-in contracts, and even more complicated pricing tiers from vendors. Square solved this with a piece of hardware, capable of reading card details, that you can plug into your iOS device. Their pricing was simple, you pay a percentage for every transaction you make with Square Reader and nothing else. Additionally, Square Reader provided much-needed mobility for merchants especially those who operate pop-up kiosks, sell at events, or are running a food truck business.
Even to this day, Square remains true to its initial niche and expanded by offering other relevant services to its customers. Their initial success was due to solving a bulky hardware problem, simple pricing, and improved flexibility and mobility when taking payments.
In the early 2010s, the fitness market was revolving around gym memberships and traditional fitness classes. If you wanted to workout at home, you were limited to DVDs, basic equipment, and self-guided sessions. Peloton knew this and saw an opportunity to fill the gap for home fitness lovers and those who just didn’t have the time to go out and train.
Their initial and still flagship product, the Peloton Bike, was the thing people needed. It offered an exceptional experience with on-demand cycling classes that were led by amazing instructors. Apart from the core experience, the bike featured a smart device, which allowed users to track their progress, compete with fellow cyclers, and feel like they were part of a bigger community. After the initial success, Peloton introduced other home workout equipment like treadmills.
Bumble is a dating app and it was started in 2014. At that time most dating platforms matched the real world where men usually initiate the first contact. Taking into account that people tend to misbehave more online, sometimes this leads to unsolicited messages, harassment, and an unequal balance of power.
Bumble was born on the idea of prioritization of women’s safety and control. Contrary to other dating apps, Bumble only allows women to send first messages. On the other hand, they first introduced the “Request verification” feature that can be used before starting a conversation which created a safer space for women. These features attracted a specific kind of people and created a healthier and more serious community which allowed Bumble to move into matching those looking for friendships and business connections.
The usual knee-jerk reaction to going after smaller groups is to be afraid but that’s exactly what some of the biggest companies today did. Geoffrey Moore wrote a book called Crossing the Chasm and explained the method of how to achieve mass adoption of your products or services. Brands with wide market appetites have to start from a smaller group of early adopters. Once these adopters have validated the offering, the company needs to find ways to move to another segment that is closer to the mainstream buyer. Here are a few examples.
Back in the 2000s, the travel industry was dominated by hotels. Travelers sought unique travel experiences that allowed them to immerse themselves in local culture. Airbnb saw this as a perfect niche to focus on in the beginning. Starting in 2008, they had their first customers attending Industrial Design Conference in San Francisco.
Early on, Airbnb’s platform featured a wide range of accommodations, from spare rooms in homes to entire apartments and unique properties like treehouses and castles. Additionally, the platform facilitated direct contact between guests and hosts, enabling travelers to ask questions, request recommendations, and establish a personal connection before and during their stay.
After the initial success, Airbnb moved into more mainstream stays, offering traditional and artsy hotels, introduced Airbnb Plus for business travelers and Airbnb Luxe for luxury travelers.
At the end of the last millennia, if you needed a book you had to visit a brick-and-mortar bookstore. With its physical limitations, they could only offer a limited quantity of books. Bezos and his team identified this situation as a perfect starting point for the global e-commerce brand selling everything from A to Z.
The first problem they solved was an unmatched variety of books. This eliminated the frustration of going to multiple stores for specific titles. Second, with their pricing strategy, they were usually cheaper options than their traditional counterparts. It also helped that they run discounts on bestsellers. Finally, they were very convenient. Readers could order books from the comfort of their homes and have them delivered practically to their doorstep.
With a solid and engaged user base, Amazon successfully attracted new customers by moving into various categories, like electronics and clothing, and introduced AWS and Amazon Prime, among other things.
First electric cars were slow, had ridiculously low range, and were, to put it bluntly, incredibly ugly and the opposite of cool. You would be considered a weird person if you drove one of those. Knowing all this, Tesla had to come up with a new electric vehicle that would challenge the common perception of their category.
For their first product, they chose to launch the Tesla Roadster, a two-seater, sporty car that can cover 394 km (245 miles) on a single charge and accelerate to 100km/h (0-60 mph) in just 3.7 seconds. So, it was the complete opposite of what everybody thought that an electric car can do. After gaining press coverage and creating buzz, Tesla launched a Model S. This was a luxury sedan targeting people with deeper pockets who happen to be conscious about climate change and renewable energy.
With success, they managed to build a great brand and community and eventually launched a product for the wider masses - Model 3.
While it is tempting to tackle the whole world as your customers, the success stories outlined here showed us that the path to success comes from focus on a niche. The advantages of reduced competition, a deeper understanding and closer connection with customers, efficient marketing, a stronger brand, and improved agility, are all perfect reasons to narrow your focus.
The success stories of companies like Square, Peloton, and Bumble show the power of niche focus. These brands captured the attention and loyalty of a specific audience but also expanded their offerings over time, leveraging their initial success.
On the other hand, companies with aspirations for broader markets, like Airbnb, Amazon, and Tesla, started small and strategically expanded. They recognized the importance of winning over early adopters before conquering the mainstream.
