There’s an intellectual current wafting through the startup world these days. The idea that small and lean is sexier. That highly targeted marketing drives success. That you should find and appeal to a very select group of customers. That you should offer fewer products and less product functionality, not more. That understanding and serving a narrow market is simpler and easier. That you can’t go big without winning small first.
Startups need broader target audiences, big idea solutions, and a diversified portfolio of growth strategies — not narrower ones.
In the words of Redfin CEO Glenn Kelman: “Most people are going to try to convince you to do some small, stinky little niche. Don’t do it! If you go with a big idea, it gives you lots of room to move.”
Don’t think small. Act big.
The Fallacy of Small.
The notion of marketing limited solutions to a narrow niche audience to spur growth and gain traction is largely a fallacy. Numerous academic studies (Barwise and Ehrenberg, Waterman, Sabavala and Morrison) actually suggest that companies that hyper-segment face DOUBLE JEOPARDY. Not only do they have an inherent economic handicap due to a smaller pool of customers and users, but research proves that smaller niche audiences are less loyal, less appreciative, and more critical without just cause.
Still Doubt It?
If you think about this contrarian research, it actually makes good common sense. Successful startups with the greatest growth trajectories did not succeed by targeting small audiences or offering solutions with limited value. They went big and they went big early. Facebook only grew when they shifted their focus from one college to the general market. Neither Flickr nor Instagram focused on the narrow niche of “professional photographers” or even “good photographers.” From day one, Google targeted “the world.” Apple, Amazon, Microsoft — they didn’t start out trying to solve small problems for a select few people.
What these companies DID do – they addressed ‘big magnitude” market needs, they set course on world changing missions, then focused on creating real value, delivering compelling customer experiences partnered with good customer service, managing operations and cash flow.
Now don’t hear us wrong. These companies didn’t try to be “everything to everyone” rather they solved big magnitude problems and had broad, “big market” appeal.
Prove it before you promote it – yes. Underpromise and overdeliver. But niche marketing and small, lean, narrowly-focused solutions can prevent your company from achieving enough momentum to become lucrative or sustainable. Small, obscure niches and solutions with limited value are startup killers; you’ll quickly saturate your market. You’ll cap profits, your market research and decisions will be skewed as a result of your small sample size, and the odds of your company scaling big are slim.
Basic “Bigger is Better” Tips.
Don’t be bamboozled into believing that “thinking small” is sexier. Broad appeal is the secret to successful startups — those startups that scale in excess of $100 million in revenues in less than 5 years, those that reach more than 100,000 customers in that same time. Bigger is better. Solve big magnitude problems. Target big markets. Offer big idea solutions — simple, creative, and easy to use — NOT “small.” Aim for high impact. Unleash generosity. Identify ways to expand your appeal to new and non-customers, to expand an industry for everyone’s benefit. Iterate variations more quickly. Explore horizontal and vertical plays. Unbundle products and services and price them separately. Collaborate to increase capabilities and offerings. Diversify your revenue stream to stabilize profits.
Small is great if that’s your goal. Selling out early to a big company for a buck or two in change so they can assimilate your product functionality Borg-style ain’t bad. But go big if you want to grow big.
For more resources on this matter:
Check out this “Target Big Markets” video featuring Don Valentine (Sequoia Capital).