The Power of the Niche

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If you were to found a company that makes and sells beer today, you would probably start a craft brewery. You’d start a small operation, find the people who enjoy your product and slowly expand your business.

You would not try to compete with Bud Light and Heinecken for shelf space. You would prefer to provide a unique product to a small, specialized segment of the beer-drinking population. The craft beer enthusiasts would be your target audience.

You would start in a niche.

For your bootstrapped businesses, niching down is an integral part of the journey. In a niche, you will encounter less competition. Your customers will be very similar, and your marketing and sales activities can be turned into repeatable processes quite easily.

So what makes a niche interesting for a bootstrapper? What is it about niche customers that you can leverage to create a sustainable business? How deep do you need to niche down to find a good audience?

In this article, I will explain what niches are, how they work, and how to make them work for your business.

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What’s (in) a Niche?

When we speak of niches in business, we always talk about smaller segments or a larger population. We’re looking for a specific subset of a more general group of people. The kind of specificity can vary wildly: sometimes we look for immutable things like age or gender niches. Other times the specifics we’re interested in are fluid things like preferences or experience levels. Some niches can be large enough to contain millions of people, and others might just consist of a handful of individuals.

What unites all niches is that they are inclusive of some and exclusive of others. The members of the in-group will be reasonably similar, depending on the specificity of the niche. That’s why niches work so well for bootstrapped businesses: if you provide a tool that solves a niche problem very well, you can be sure that everyone in the niche will be interested in it.

Selling to a niche is very different from selling to the general public. If we go back to the example of the beer industry, you will see that Anheuser-Busch InBev, the makers of Bud Light, spends more than $1.5 billion every year. They do that because they need to be present in the mind of every single shopper when they think of getting a beer. For a small craft beer company, this kind of marketing expense is impossibly high, and it would be a waste. They would show their product to millions of people, but only a fraction of them would even consider drinking a non-mainstream beer. Niche businesses are better off spending much less money in much more directed ways. A craft beer company might put up flyers in a local pub that is serving lots of craft beers or allocate a budget to exhibiting at beer fairs. A niche business will market to their niche and no one else.

Who’s in a Niche?

So, what makes niche populations unique? The way I see it, they are mostly homogenous, often tribal, and allow for much better measurement and planning than huge non-specific audiences.

Niche Populations Are Homogenous

If you filter a large group of people by several specific properties, you will end up with an audience that shares those properties. As a result, these people will also share many other things that can make building products and selling them very convenient.

People in your niche will likely have the same problems. If they love fantasy football, they all need to keep track of their teams. If they enjoy fly-fishing, they all need to find information on where to fish and how the weather will impact their chances of a catch.

If you spend enough time investigating the problems of your niche, you will sooner or later surface their critical problems. These are the things that are common roadblocks for everyone in the niche. Solving that problem with a dedicated product will allow you to have a high chance of success with your bootstrapped business.

People in a niche will also share very similar goals and aspirations. People who love knitting want to make beautiful pieces of clothing. Craft beer fans want to find (and drink!) the best and most exciting beers in their area. Recruiters want to recruit as many well-fitting candidates as possible.

From a goal, you can usually infer a problem that is in the way of your customer’s path to success. Solve that problem, and you can help everyone in the niche reach their goals.

People in your niche will also speak the same (metaphorical) language. While many niches are globally distributed, the people in them will all share a common understanding of what matters to them. Dungeons & Dragons fans will know what a D20 is, and woodworking aficionados will have no trouble understanding why you’d prefer Alternate Top Bevel over Flat Top Grind saw blades for a clean cut. In your marketing communication, you can assume that everyone in the niche has specific knowledge that you can build on. Not only does this allow you to be precise in your communication, but it will also show that you know what you’re talking about; that you are one of them.

Niche Populations Are Tribal

That brings us to another fundamental property of niche populations: they are often organized tribally. Seth Godin wrote a book called Tribes, in which he describes a tribe as “A tribe is a group of people connected to one another, connected to a leader, and connected to an idea.” That sure sounds like a niche audience!

This interconnected group of people looking for leadership can be a godsend for your business. You can either leverage existing leaders in the community, which are usually called “influencers.” Alternatively, you can become a tribe leader yourself. There is room for a lot of leaders in most niche tribes. In such a position, you are regarded as an expert who also offers a product specifically designed for members of the tribe. This position makes selling significantly easier than hoping for random strangers to see your product and buy it on a store shelf.

People derive their identity from belonging to a tribe. If you can place your business in a way that makes your product a thing that “what people in our tribe do,” then you will have a guaranteed sales funnel for as long as your niche exists.

Niche Populations Are Measurable

In niches, you can find out the numbers more easily than in a more general population. If you’re trying to find out how many potential customers you have, it will be much easier if you’re a craft beer brewery that has advertisements running in 10 local pubs. Figuring out how many patrons they can reach will require a few evenings of counting people in those places. For Anheuser-Busch InBev, it’s an entirely different story: for them, every human on earth who likes beer is a potential customer – but the chances of them buying are hard to calculate, and so is the effectiveness of a massive billboard campaign in hundreds of cities.

With large populations, measuring is a hit-or-miss activity, as everyone is competing for attention. Within a niche, you can expect much more engagement from your potential customers as soon as they are exposed to your content.

The better you define your niche market, the more confident you can be in your numbers. “People who like fantasy football” might be a vague definition that doesn’t give you much to work with. “People who logged into one of the three most popular fantasy football websites over the last three months” will yield more actionable numbers. At best, you will get numbers that allow you to validate a viable audience for your bootstrapped business: not too small and not too big.

The Ins and Outs of a Niche

An interesting perspective on niches is that you can also look at what a niche does not contain. By defining things that you don’t expect to see in your niche, you have access to exclusionary filtering as well.

Once you know what you don’t have to care about in your niche, you have the means to deal with the inevitable noise that you’ll find in every market, no matter how well-defined your audience is. There always will be misfits and contrarian voices. By knowing what you can ignore, your focus will be on the things that matter most to the most substantial part of your niche.

Opportunities of a Niche

With niche audiences being homogenous, tribal, and measurable, you have several opportunities to help your bootstrapped business succeed:

Low-Cost Marketing

Shared interests will allow you to speak to the needs of your niche audience directly. Creating content that has a lot of impact and will be read by a lot of people will be easier, as there is less competition for your audience’s attention. More generic markets might be saturated with content, but inside a niche community, people will always be eager to learn more about their area of expertise.

Targeted advertisement works very well for niches too. As Pay-Per-Click costs are lower for many niche terms, your ad campaigns will be much more cost-effective than if you were to target a more generic term. The more specifically you can define your audience, the more effective your campaign. This also extends to traditional media of communication. If your niche audience is fond of reading industry magazines, a print advertisement might put you in front of hundreds of thousands of readers who would be hard to reach using digital ads.

Partnerships in niches become a much more lucrative endeavor. Additional exposure and reach results in quick win-win situations, where both partners can significantly boost both their customer base and their reputation as an expert in the niche. Partnering up with other players in the niche allows you to reach customers at different stages of “niche proficiency,” increasing the breadth of your sales funnel.

If you lead a tribe, it will eventually do the marketing for you. A large following will amplify your messages with a lot of reach, giving you credibility and encouraging newcomers to become customers so they can belong to the tribe.

At FeedbackPanda, Danielle started a tribe around her thought leadership in the field of Online Teaching. She became an advocate for the needs of these teachers, and they followed her actively on social media, engaging in conversations, spreading the word, and, best of all, even defending the company and the product against people who dismissed or publicly disliked it. That’s the power of a tribe.

Word-of-mouth marketing is another effect of using tribal structures in a niche. If you give people the opportunities to share your content and messages with other tribe members, they will. The interconnected nature of tribes facilitates this rapid exchange of information, and if you leverage those channels, your product will sell itself. At FeedbackPanda, it took one well-placed Facebook comment to start an avalanche of word-of-mouth referrals that lasted for years.

Referral Marketing Systems

Now that we’re talking about referrals: if you’re in a niche with a healthy and active tribe, you will have success with customer referral systems. The effect of referrals will depend on the shareability of your product. Some products will make sharing easier, like network-effect-driven collaboration tools, where a new user will add value to the network for everyone involved. Other products won’t be as easy to share, like a tool that makes a recruiter find better leads – they probably wouldn’t want competing recruiters to use this tool as well.

If your product is shareable, spend time on creating a referral system early in the life of your business. If it’s not shareable, defer this kind of system until you have exhausted better, more effective marketing techniques.

Influencer Reach

Niche influencers are usually perceived as much more professional public personas than the more general kind of celebrity influencer. Most niche influencers are experts in their fields, and what they talk about positively gains credibility. Their following consists mostly of other members of the niche, making them an excellent candidate for spreading your message.

Luckily, these influencers are also much cheaper to partner with than the prominent super-influencers. Often, they are not even aware of their influence, or they don’t necessarily see it as a monetizable activity. While I recommend you still offer them reasonable compensation, you can approach niche influencers as potential partners instead of just seeing them as a marketing channel.

Differentiation Is Easy

Lastly, it’s easy to build a unique and differentiated product when the landscape of competitors and competitive alternatives is clear and uncluttered. Fewer competitors mean more potential differentiation vectors: you can stand out much more by providing a service that is not yet offered in the niche.

Analyze your competitors for what they do well and what they don’t when you do your market research. If you’ve done your problem validation right, you will see gaps in the market that are not yet served. Build your products around those gaps, and look into partnering with your competitors to expand each other’s customer base.

Look out for non-competitor competitive alternatives: the things people use instead of using an actual product. This can be Post-It notes, an Excel Sheet that does not involve numbers, anything that is a general tool applied to a specific problem. That is where you can find your critical problems, and that is where you can serve your niche best.

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The only remaining question is, “how deep do I need to niche down?” In reality, this will depend on the size and quality of the initial group of people you niche down from. The more specific you get, the smaller your audience will be in scale. Like in machine learning, you run the risk of “overfitting” your niche; you might get too specific. There might be a few hundred “Star Trek fans that live in the New Orleans area and love to eat Quinoa,” but that won’t sustain a bootstrapped business.

In general, a good niche size will allow you room to grow to your MRR goal and still leave space for a few competitors. To determine the size of your audience, you will need to do some research. Your target size should be small enough not to invite large competitors and big enough to sustain your business. If it’s too generic, niche down by being more specific in who you want to serve. If there are too few prospects, niche up by loosening the requirements for someone to fit into the niche.

A good niche will allow you to build a product that solves one problem well. In the best case, this will be the critical problem of everyone in the niche, and it will solve it well enough for your customers to tell everyone they know.

Building a tribe in a good niche will allow your product to sell itself.