The value of defining a customer niche and how to do it

It’s hard to build a business when you’re trying to target everyone

In this resource we cover why it's important to focus your efforts on a core group of customers with similar behaviours.

The mistake a large number of founders make when they're developing their product and strategy is targetting too many different types of people.

When you’re a startup you don’t have the time or resources to reach everyone.

A better approach is to focus on the group of people who need the product the most and are prepared to pay for a solution immediately. Doing this makes decision making and resource allocation more efficient.

This specific subgroup of customers is called a customer niche.

A customer niche is a defined group of people with similar qualities and behaviours when it comes to the problem you are solving.

Why is it important to define your customer niche.

In the wise words of Paul Graham, it's better to make something a small number of people love than something a large number just like.

Mum's Garage, Customer Niche, Make something a small number of users love

It's very difficult to make something a large and diverse group of people love with just a small team and not much money.

This is because, within a broad range of people, there will be groups with different behaviours and values. As a result, they will likely have slightly different requirements for the product and they will almost definitely require different approaches to convince them to buy the product.

Meeting the needs of different customer groups requires additional resources; more than most founders realise.

Most startups have significant resource constraints so it's necessary to initially focus a specific customer niche.

By focusing time on deeply understanding this user group and developing product accordingly, companies have a better chance of building something this group of users love.

Once this has been achieved, a company can start building additional features and marketing or sales approaches that will fit the needs of another target market.

A focused target market reduces the number of variables in your business, which increases your chances of success. 

Successful businesses build a system that combines the right variables to produce something that, as a whole, is greater than the sum of its parts.

Important variables in this system are customers with a set of needs (or problems) who will pay for the solution your company provides, at a price that enables the business to be sustainable. 

Having more customer groups increases the number of needs that must be met to satisfy the demands of the customer, which increases the requirements of the solution.

This significantly increases the number of variables that the business is having to manage. As a result, building products, marketing, selling and managing operating becomes more complex and more expensive. 

Example of startups and their initial niches:

Successful companies looked a lot different in their early stages before they achieve market domination. They may have broad target markets now, but their approach in the early stages was likely much more targetted. Here are some examples:

  • Amazon — rarely sold books.
  • Ebay — intense interest groups, like beanie babies obsessives.
  • Paypal — ebay “PowerSellers” — the professional vendors who sold goods online through eBay’s auction marketplace.
  • Uber — started as black car service app so people could feel like VIPs when going to clubs.
  • Airbnb — cheap accommodation specifically for conference goers in San Francisco, to take advantage of hotel room shortage.
  • Facebook — Harvard University students.

The process of refining your target customer niche

You can start the process of identifying your initial target market by doing market validation. This means talking to and collecting data on the people you think have the problem you are trying to solve. Talk to as many people as you can. You will start to see consistencies between different groups of people, their behaviours, and how much they care about the problem you are trying to solve. From this process, you can start to draw conclusions about your initial target market and make decisions about how to develop the first version of your product and go-to-market strategy.

Once you have your product in the market, make sure you prioritise getting to understand the people who use your product. You may start to see that your product is particularly popular with a subsegment of users. If this is the case and the business economics of servicing the market stack up, focus your efforts on growing within this subsegment.

Developing a hypothesis about your initial target niche

We like the basic apple tree analogy for developing a hypothesis for who the initial target market might be for a company. Customers are split into three groups, high hanging fruit, low hanging fruit and jam on the ground:

  • High hanging fruit- dream clients that are currently too big and complex for you to reach/serve.
  • Low hanging fruit - you could reach them, but it would take a lot of time and effort to convince them to buy your product.
  • Jam on the ground  - the ones who need you the most and will love what you do because of it. These are your early adopters.
Stickperson plucks Apple

Example: Business-to-business (selling a product to a business)

  • High hanging fruit: large corporations with well-embedded systems and a long sales process.
  • Low hanging fruit: SME’s who can afford to employ people to solve the problem, but it uses time and costs money to do so.

  • Jam on the ground: a specific type of small businesses who are really struggling with this problem and are pulling their hair out because of it.

The ‘Jam on the ground’ is likely to be your early adopters. You can begin your market validation by identifying people within your own network who fit the description.

Exercise: Defining your Target Market

Identify the high hanging fruit, the low hanging fruit and the jam on the ground for the problem you're solving:


Who are your early adopters (the jam on the ground)?


Who in your network fits this description, or how can you connect with more people who are your early adopters?