The importance of niching down

I had a chance to speak with over 200 SaaS founders over the last couple of years.

I asked almost all of them one question:

What is the single piece of advice you would give to a younger self who’s just about to build a new SaaS product?

Do you know what the most common answer is?

Niche down from the beginning.

You have no idea how true and important that is.

No matter what market you are in, the competition landscape is growing each day.

You’re probably getting a couple of new competitors popping up each month (if not each week or day).

From what I saw, 95% of SaaS companies are vague about their positioning.

All of them are serving the same audience with the same products.

Here’s why that’s a wrong choice.

Whenever someone feels the need for your solution, naturally, he’ll first consider a couple of most prominent category leaders.

Let’s say you need an email marketing solution.

What are the first products you’ll come in touch with?

Mailchimp, Klaviyo, Privy, Getresponse, Activecampaign.

That’s it.

So if you’re selling to “everyone who needs an email marketing solution”.

You will have a tough time actually selling your product and getting money.

Because you compete with all those category leaders.

But if you niche down, and sell a content marketing solution for online creators, you won’t compete with the category leaders.

Because category leaders are not the right choice for this very specific group of people.

Technically, you’re the leader in the market of one.

Nathan Barry, Founder of ConvertKit, did this exact thing.

He positioned his product as an email marketing solution for creators.

And he was able to grow ConvertKit to over $30m in ARR.

I also saw big success after I repositioned my agency Contenthorse.

In winter 2021, we were just another content marketing agency for SaaS.

There are hundreds of them for the Gods Sake, including category leaders like Animalz, Grow and Convert, Foundation, and others.

But then I decided to reposition Contenthorse into a content marketing agency for Early-to-mid-stage SaaS companies that’s focused on getting you more conversions and leads through content rather than more traffic.

And that message resonated so well with our target audience that today, we have a bigger demand for our services than an actual supply.

So, long story short, why should you focus on niching down instead of fighting with the entire category:

1. You’re able to craft a messaging that better resonates and engages with your target audience (for example, if you’re a creator, would you rather optin for Mailchimp, which has $700m in revenue, or ConvertKit, which has $30m in revenue but it’s more appropriate for your needs? - of course, you’ll choose ConvertKit)
2. You’re able to create better solutions for your dream customers - since you know exactly who’s your customer and what’s their use case, they’ll enjoy your product more.
3. You’re not fighting in the category of many. You’re fighting in the category of one - so the choice that you’re potential customers are going to make will be straightforward - since they won’t need to compare a couple of different tools
4. And last but not least important, your overall growth and marketing strategies will be 10x easier because you exactly know who you are talking to.

So, instead of being X for everyone.

Be X for Y.

So, for example, if you really want to create another email marketing solution, you can niche down even more than Nathan Barry and create an email marketing solution for Instagram Influencers with less than 5m followers.

Niche down and be the rockstar of your company.

And please, don’t worry about the TAM.

Once you feel that you cannot grow more in your current TAM, you can quickly expand further.

Just don’t build some solution that has less than 500-1000 accounts in your TAM - that’s not worth it (Ofc, this depends from market to market).

Some further resources to get better at positioning, niching down, and messaging:

• “Obviously Awesome” by April Dunford
• Marketing and Copywriting examples by Harry Dry (it’s marketingexamples.com)
• Pedro Cortes writes a lot about SaaS messaging on his LinkedIn profile (will drop a link in the comments)
• You can find a lot of insights about this inside Dave Gerhardt’s DGMG community of B2B Marketers.

Happy niching down!