Start Up Blog

Niche Marketing & Startups

Posted in entrepreneurship by Steve Sammartino on September 11, 2009

Once upon a time I used to think that entrepreneurs had to be smart enough to develop a niche strategy. A nice smart strategy which will keep them hidden from the big ugly and powerful incumbents and other startups. A strategy to extract sneaky revenue.

I learned how wrong I was the hard way. I was way to clever with my first startup 1-bil (an anti stress drink). We developed an incredibly clever niche distribution strategy aiming for 5 star hotels, business class travelers on airlines and airports. What we called a ‘sneezer strategy’ of niche distribution to grow from. The category influencers.

Anti stress drink

Turns out niche strategies limit the number of doors we can knock on. It limits the number of people we can sell to. It limits the angles of success we can have. It limits the number of rejections we can have (and we’ll get plenty) When we get a rejected from our core strategic market, we lose confidence, we count how many points of distribution we have left and start to struggle and lose faith. We invent our own failure.

The niche market is great for well resourced companeis doing innovative stuff. Not so for startups. It’s very counter intuitive. Entrepreneurs need to learn the truth about niche marketing. And the truth is this:

Gaining traction with any new product or company is inherently difficult. We ought sell to anyone who’ll buy our stuff. Get the message out to as many people as possible. Take all the revenue we can get and what will transpire is a niche strategy anyway due to natural startup dynamics. We’ll get rejected 9 out of 10 times on average. We’ll end up in a market niche, from which we’ll have to grow and expand from anyway. Starting with a niche in mind, really just limits our probability of success.

The startup lesson is this: Find your niche through market dynamics, don’t target it.

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9 Responses

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  1. EppingElectrical said, on September 12, 2009 at 2:04 am

    Interesting.. our initial business idea was a very niche one, but then we started in ealy 2009, when the world seemed on its deathbed with the Global Financial Crisis -and we decided to play safe and started a generic electrical contracting company.. a service people cannot do without, recession or otherwise.. And just like you said, we are finding our niche through market dynamics. We’ve expanded into related services depending on what customers keep asking us for, and we are narrowing down in other areas we do not really want to see ourselves in. But this choice is made easier from the fact that we were open initially and made enough sales/cash flow to allow us the flexibility…

  2. Roberto Valle said, on September 12, 2009 at 7:48 am

    Steve, I am working on my first start up. Of coarse I have limited cash, how would you recommend me to develop a marketing strategy if my target market consists in two niches? film students and music student. Reading your post made me think about my communication strategy because I was thinking on directing the message directly to my two niches. I found other niches that could be interested in my service, but they are not as big and I do not think they will get used to it as fast as possible. So, do you think it would be wiser to develop a strategy that takes in consideration all the niches, let´s say fit all the niches in the same message, or to develop an strategy that fits to every niche even if I will need to cut the budget from other parts of my start up?
    Thanks a lot for the post even if you made me more nervous than I was. hehe :)
    Cheers for your blog!

    • Steve Sammartino said, on September 12, 2009 at 12:46 pm

      My advice is go to as wide a market as possible trying to sell whatever it is you have. Slightly adapt the product offer to the slightly different markets. Let the market help the product evolve. Just don’t limit yourself. Knock on as many doors as possible and allow for product and service iteration which leads to sustainable revenue.

      The point is to give yourself as many shots at revenue as possible. Work out what your ‘niche’ really is.

      Steve.

  3. Michael Scepaniak said, on September 13, 2009 at 3:09 am

    This is really interesting to me, as it runs counter to other start-up advice I’ve read. I believe some of the motivations for targeting a niche include:
    – It’s cheaper to advertise to a smaller, more concentrated market.
    – Prospects will be more receptive to your message if they feel it targets them, specifically.
    – It’s easier to establish credibility faster within a niche.

    But your stand here feels right, as well. Are you familiar with Steve Blank’s Customer Development methodology? http://j.mp/fqkSq

    I’m thinking that, whereas you espouse finding and settling into your market niche via/after selling to “anyone who’ll buy our stuff”, I’d like to see that done via Customer Discovery (step #1) and Validation (step #2). Mind you, Customer Validation includes selling. I guess it comes down to how expensive it is to do that selling (including producing that which you are selling). Because you can’t just assume that if you fire it out into the marketplace with a shotgun that anyone will trade you cash for it. :)

    I’d like to hear your thoughts. Thanks.

    Mike….

    • Sean Murphy said, on September 14, 2009 at 8:09 am

      The strength of a testimonial is highest with others who can directly identify with the firm or person offering it. A market niche is defined by a set of firms who will be guided by a purchase decision.

      The challenge in “targeting everyone” is that different niches may find very different uses and need very different messaging. Look at the way aspirin is marketed for headaches, for arthritis, for children/infant pain, and to prevent heart attacks. It’s four different messages.

      I do agree if you can resist the temptation to tell unanticipated customers “this is not meant for you” or customers finding novel uses “you are doing it wrong” you may very well discover another market.

      But I believe that startups have to have a clear theory of value and target customer that informs their product design, messaging, and sales strategy. This way they can create explicit and testable hypotheses (and replace them when they fail). If you are going after everyone what do you change? How do you message? How do you decide to change sales strategy or re-design the product.

  4. [...] Niche Marketing & Startups « Start Up Blog September 12th, 2009 The NicheMaster Niche Marketing & Startups « Start Up Blog [...]

  5. [...] was inspired by “Niche Marketing & Startups” by Steve Sammartino, an Australian blogger I always find thought provoking even when I reach [...]

  6. [...] Sammartino had a thought provoking post on “Niche Marketing & Startups” that opened with this: The niche market is great for well resourced companies doing [...]


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