Niching Down Effectively

It's common knowledge that you need to niche down when starting up.

But why? And niche down on what?

Niching down is a strategic decision. It doesn’t happen for no reason.

But the reasons for niching down aren’t truly understood.

So companies and product teams struggle to do it effectively.

Blind strategy vs Precise strategy

On top of that, to most founders and product people niching down seems counter-intuitive. It’s easy to get a little caught up in your vision for the product.

It’s also too easy to pass off the niching problem as a marketing problem. That's a trap. It’s just as much a product decision. That’s because your niche is integral to your product market fit (PMF).

If you choose the right niche, you benefit from:
- Less competition
- A better product experience for your real users
- More relevant messaging / marketing
- Viral word-of-mouth in your niche

Now I’ve hopefully convinced you, here’s my guide.

Starting point

You've probably got a grand vision for your product. This is what you might think is your starting point.

Steve Jobs thinking about his vision

E.g. Uber started with the vision of making it easier and cheaper to get direct private transport.

Let's say Uber wanted to start in the US.

How do we know if this is a good niche to start in?

The delta score

The best niche will be where users want to pull your product out of your hands and will forgive your imperfections.

To find it, you’ll need an approximately objective way to measure the impact of your product experience.

That's where the delta score comes in. I heard about it from Kunal Shah. It's essentially a quantitative measure of the value of your product to a user.

Here's how it works:

  1. Rate the status quo experience out of 10.
  2. Rate the new experience of your product out of 10. Be realistic.
  3. The difference between these ratings is called the delta score.
  4. If it's greater than or equal to 4, you’re creating undeniable value for those users (high PMF).
  5. If it's less than 4, you're only creating incremental value (low PMF).

It's a great quick way to test the likely PMF of a potential market.

Uber's delta score in the US

Back to the Uber example.

So we're doing a thought experiment on how effective the US was as a niche for them. Taxis across the US were likely pretty average - after all it's a big country. But in the early days, with very few Ubers on the road, users never would have been able to find an Uber. My bet is it would have actually been a worse experience.

Taxis and Uber in the US

Niching down

By city

What if Uber decided to niche down in New York? The taxis were actually pretty good there, so there likely wasn't too much difference.

Taxis and Uber in New York

So Uber decided to start out in San Francisco, where taxis were exceptionably terrible and expensive.

Taxis and Ubers in San Francisco

By country

Spotify originally tried to launch in several European markets but couldn't secure enough licenses. After all for their app to work they had to have very extensive music catalogs in each country. So they scaled back to Sweden.

Spotify Niche Strategy

By experience

Starbucks initially sold coffee beans and coffee-making equipment. It was then taken over by Howard Shultz, who wanted to focus on the then niche concept of serving coffee in store.

Starbucks Niche Strategy

By the innovators

Apple was founded with the grand vision of making computers useful and affordable for all. But they were reasonably early in the new technology's life. The everyday person had no idea how a computer could benefit them.

Apple's Niche Strategy

There you have it.

It might be possible to launch with a broad focus, but most successful companies either start with a small niche or quickly pivot into serving a small niche.

And that's how it's done. Couldn't be easier to try.

You should also check out

Mike Maples Jr on Spotify's niche strategy

Kunal Shah on Delta 4 experiences


Hey! I'm Cameron.

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Cameron from Conversion Examples and Converted Agency