Should I focus on my niche or exploit opportunity?
Hi Jeffrey,
My start-up has designed a software product especially for small, retail businesses. We are starting by focusing on one sector in retail: shoe store. But, I am pleased to say, our product has been generating buzz and retailers in other sectors are starting to contact us.
I believe we should focus on shoe stores for the time being. My business partner thinks we should take every opportunity that comes our way. What do you think?
C
Hi C,
That's a great question and one faced by many start-ups. Of course it is tempting to accept all business that comes your way − after all, the retail sector is much bigger than the shoe shop sector. My suggestion is to focus on shoe shops for the time being, but over the medium term, copy the approach used by a company that launched about a decade ago and which you may have heard about: Facebook.
Facebook initially was available only to Harvard University students. As it grew, Mark Zuckerberg and his partners made it available to other universities one at a time and then a few at a time. Only when Facebook became really well known, did they make it available to the general public. By initially focusing on one University at a time, the then very small Facebook was able to get lots of users who were eager to connect with other students in their university. Moreover, that it was widely used by some universities made it easier to sell when they made it available to other universities.
I think you should do the same. Focus on shoe shops for the time being and get more and more of them to use your software. Because of the nature of your product, the more similar shops that use it, the greater the economy of scale, the more interesting for your suppliers and the more valuable you become to shoe shops.
Once your product becomes wide-spread in the shoe shop sector, expand into another sector and do the same thing. Only when a number of different sectors are using your product should you open it up to all retail shops. In the meantime, I suggest that when businesses outside your sector (or sectors) of interest contact you, explain that you will offer a software designed for their sector in the near future and put them on a mailing list. To keep them excited, mail them from time to time with news relevant to your product.
A further advantage to this approach is that you and your salesperson − and eventually your sales team − can get to know one retail sector at a time. This enables you to build knowledge and understanding of each sector, which makes it easier to approach prospective clients, understand their needs and pitch your software in terms of those needs.
Good luck,
Jeffrey
