EP29: Focusing vs. Niching

by | Nov 7, 2023 | Marketing, Podcast, SaaS

You may have heard the terms “focusing” and “niching” used to describe how a company can target its audience, but what do they really mean? Choosing the right marketing strategy can make or break your business, so it’s important you understand the nuances here.

Focusing is about the short-term, while niching is all about the long-term. And the strategy you choose will have a profound impact on how your business grows and adapts to the market over time. In this blog post, we’ll explore the benefits, challenges, and real-world implications of focusing and niching, so you can make the best choice for your business. Let’s get started!

The Fundamentals Focusing vs. Niching

The terms “focusing” and “niching” often get used interchangeably, but they refer to distinct business strategies. Focusing is about dedicating time and resources to a specific market segment for a particular duration. Niching, on the other hand, implies tailoring a product or service specifically for a particular market segment—essentially claiming it as your “lane.”

Take a CRM company as an example. If it decides to niche down by targeting trucking companies, then those become the ideal clients, and the product is specifically designed for them. If a marketing agency shows interest in this CRM, it probably won’t meet their needs, as they aren’t the intended market.

In contrast, consider a CRM designed for small businesses that opt for focusing instead of niching. Over one year, it may focus its marketing efforts on agencies and in the following year, shift the focus to creative agencies. The product itself remains unchanged; only the marketing target shifts. So, if a marketing agency were to use this CRM while the focus is on creative agencies, they’d still find it helpful because the overarching target market hasn’t changed.

A critical point to remember about focusing is its temporary nature. Founders sometimes misconstrue focus as a long-term commitment. In reality, a company can shift its focus as market dynamics evolve.

This strategy is particularly beneficial when a business has a diverse customer base. It allows the company to tailor its offerings to a profitable segment for a specific time, thereby deepening its understanding of that segment. To identify the best segment to focus on, consider these questions:

  • Who are our most loyal customers?
  • Who is most willing to pay for our product or service?
  • What segment has the lowest customer acquisition cost (CAC)?
  • Is there any overlap in your answers to the above questions?

Focusing doesn’t mean you’re abandoning other segments or closing yourself off indefinitely. Rather, it’s about targeting the most easily acquirable customers initially, then broadening your focus as needed—often over a span of five to ten years.

HubSpot serves as a prime example of successful focusing. Initially an email marketing platform, it expanded into demand generation and later into the enterprise market. Recognizing further potential, HubSpot then broadened its suite to include CRM and support ticketing features, catering to various teams and market segments. As a result, they’ve evolved into a robust software platform catering to a diverse range of businesses.

With a clear understanding of the differences between focusing and niching, companies can make more informed strategic choices, allowing for growth and adaptability in changing market landscapes.

The Intricacies of Niching in Business Strategy

Now, let’s talk about niching. Niching is a term that often signifies a laser-focused approach to your business: you’re “X software for Y people,” full stop.

Unlike focusing, which is fluid and may change over time, niching is definitive. However, it’s not merely confined to a specific industry vertical; sometimes, it zeroes in on a unique persona or even a particular use case. But most importantly, niching isn’t a temporary strategy. It’s a commitment that shapes your business for the long term.

Both focusing and niching are legitimate market entry strategies, and there’s no universally ‘right’ or ‘wrong’ approach. The critical factor is its effectiveness in moving you closer to your organizational goals. If you’re offering a product or service with versatile applications across various segments, focusing might be your best strategy. With niching, the key is to select a market or category that has more entries than exits, indicating a healthy potential for growth.

Consider the example of shopping malls. The mall industry saw explosive growth in the ’80s and ’90s but has been in decline in recent years. If you were to build software specifically for malls, you’d run the risk of being stuck in a diminishing market. Niching into a declining market could spell disaster for your business unless you’re prepared to pivot or diversify your offerings.

One of the most advantageous aspects of niching is that it can bring tremendous clarity to your business. For founders who are easily distracted by a plethora of opportunities, niching can be a liberating strategy that allows them to invest deeply in one sector, use case, or customer persona. However, this comes with its own set of challenges. It’s easy to become so engrossed in your niche that you overlook significant industry shifts.

The cautionary tale of Blockbuster serves as an excellent example. Blockbuster dominated the physical movie rental space but failed to adapt to the rising trend of online streaming. By not paying attention to this seismic shift, Blockbuster became a victim of its own overly-niched strategy. Its lack of flexibility and failure to innovate led to its downfall.

In a world where market trends shift at the speed of light—especially in the tech-savvy landscape of 2023—you have to remain agile. Even if you’re niched, it’s vital to keep an eye on macro trends that could substantially impact your industry or segment. Ignoring these trends can lead to the same fate as Blockbuster: a once-thriving business rendered obsolete by changing consumer behaviors and technological advancements.

In conclusion, niching can be an incredibly potent strategy that allows you to dominate a specific market or serve a unique customer persona with unparalleled expertise. However, the risks associated with this approach necessitate a deep understanding of the market and a readiness to pivot when signs of market decline become evident. The key to successful niching lies in striking a balance: being the master of your chosen domain while still keeping a watchful eye on the evolving market landscape.

Wrapping Up

In conclusion, focusing and niching each have their unique benefits and challenges. Focusing allows you to target specific market segments for a set time, and this strategy is particularly beneficial for larger businesses with the resources to tackle multiple segments over time. Niching, however, is a long-term commitment to a particular segment or market. While it naturally offers focus, it also requires continual innovation to keep pace with the broader industry.

Both approaches are valid, but the key to success lies in commitment. If you’re uncertain about which of these two strategies is for you, or contemplating a shift in strategy, consider consulting an expert. Book a free 45-minute growth audit with us today.

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