Everyone talks about finding their niche, but many SMB companies fail to understand just how much it matters. Often, the companies that find and target a narrow, underserved segment of customers experience the most success. To start finding your niche, ask yourself who are your very best, most profitable current customers? Why do they buy from you instead of from competitors? Look for common characteristics, interests, and problems. This will indicate how your offerings deliver unique value to an ideal niche of buyers.
These were the questions we asked at Postini, an anti-spam software start-up I worked for. For readers too young to remember, in the early days of the internet, spam email was a massive problem. It wreaked havoc on the productivity of just about every worker who relied on email. It got so bad that local TV stations ran endless news spots about the spam pandemic. In response, several anti-spam companies cropped up, and Postini was one of them.
Almost every company needed anti-spam software. While we did sell to all sorts of businesses, I knew that for us to grow fast, we had to find an industry we could dominate. One of the most common spam messages advertised incredible new rates on mortgages. Most of the anti-spam software started blocking all emails that had something to do with mortgages. For most companies, this was great. But for banks, small lenders, mortgage brokers, and people in the process of buying or selling homes, it could be disaster. If a spam filter blocked those likely legitimate messages, banks might lose customers, and people might not close on their new house.
We happened to have a unique feature that allowed businesses to set the spam capture rate for specific words and phrases. In other words, a bank could decide to let emails about mortgages through. We realized that the thousands of small to midsize banks and mortgage brokers would be an ideal target audience for this unique capability, and we focused on marketing to them.
We learned how to speak their language. Buyers in our niche soon recognized us as leaders who better understood their needs, and they would talk about us to their peers. Sales rapidly accelerated. Soon it was almost impossible for our competitors to get a foothold in this segment of the market. Focusing on less helped us sell more. Once we established ourselves in that initial niche, we looked to branch out. We used a similar focused approach to go after different industries that had similar problems. Our highly focused strategy paid off, and eventually Google paid $750 million dollars to acquire Postini, and it used our software as Gmail’s spam filter.
Finding a niche like the one above often requires a company to focus in on small segments of the market. Unfortunately, most companies avoid doing that because they fear that focusing on a smaller customer segment will limit their growth. It can be scary to focus and go all in on a smaller target audience. But if you try to be all things to all people, or even to a broad segment of people, you’ll dilute your message. Nailing a niche is freeing. It enables you to develop a product road map with a go-to-market strategy, messaging, and content that will connect with ideal buyers instead of wasting money chasing people who probably won’t buy anyway.