I have been doing quite a bit of reading in the last few months to wrap some concepts around my head, and one of the books on my list is Start Small, Stay Small: A Developer’s Guide to Launching a Start-up. One of the key concepts presented in this book is to pick a niche as opposed to trying to cater to a large mass of people. He takes it a bit further and advises that everyone has a warm niche:
“A “warm” niche is a niche where you have some kind of association” ~ Start Small, Stay Small
A lot of us entrepreneurs think: “I’m going to target this group of people that has at least 3 million members; if I get only 1% of that market, my business will be off to a great start.” The thing with targeting such a large mass of people is that there are usually a few big players with large amounts of money targeting that group already. In business market share is everything, so the cost to get a measly 1% out of the hands of an established player might cost more than a small start-up can afford. This is where niches come in.
A niche is a small group of people that require a specialized service. Think about it this way:
You might be looking into developing a business that caters to the needs of craftsmen. There might be a lot of craftsmen in your market so you can look at a specific type of craftsman, say a carpenter. There are fewer carpenters than there are craftsmen. You might then consider narrowing it down even further by focusing on carpenters that cater to corporate clients. This is choosing a niche.
The concept of warm niches helps you choose a niche where you have some knowledge. For instance if you know someone close to you that is a carpenter who caters to corporate clients, he might help you acquire intimate knowledge of the issues that he faces day to day that your offering can solve. You can also, with his permission, use him as a resource in your research. He can point you in the direction of prominent trade publications or places where he and his colleagues hang out.
Picking a niche makes marketing your offering significantly cheaper because you are trying to reach a smaller number of people. And because this group is so much smaller, you can focus on where they hang out rather than trying to put out mass advertising. There is nothing wrong with mass advertising, but it is very expensive to reach a larger mass of people and that expense is something that you may not be able to afford.
So instead of trying to focus on 1% of 3 million; why not start with 1% of 30,000. It’s only 3,000 people, but these 3,000 people could make the solid start to your business.
Walling, Rob (2010-08-04). Start Small, Stay Small: A Developer’s Guide to Launching a Startup. The Numa Group, LLC. Kindle Edition.