When you make a web search in your favorite search engine, nine out of ten times, you don’t go to the second page. So it’s the first ten results that matter and rest are ignored. Same way the human brain works. There’s a list of top choices for everything and we normally ignore the others. So here’s the question: do you want to be the top choice for something, or mediocre for everything? I believe in today’s world, to be a specialist in something is what matters, which endorses that niche is indeed the way to go.
Targeting a niche market is important also due to the fact that one size doesn’t fit all, be it individual or industry. Consider something like developing Enterprise Resource Planning software. There are several minute details in every industry and to make sure you are optimizing resources for a company in that industry, you need to know those details inside-out. So I believe the best way to sell ERP solutions is to target an industry, master the economics of that industry and mold your software to take those details in consideration and make your solution attractive, and the primary choice, for companies in that industry. Such an ERP solution will definitely appeal more to companies in that industry as compared to generic ERP solutions.
In certain consumer products, companies make a mistake by directly going for the mass market ignoring any niche to which the product might have a special appeal. This process is often more expensive and doesn’t work for most companies, with exception of a few with really deep pockets. I believe a better approach is the one taken by companies like Apple and Whole Foods. These companies market their products to a small niche, to people who consider themselves member of these company’s cult, and then expand their reach to the masses. In the process, they generate support from a group of mavens who add to the company’s capacity to target a bigger and broader market in the long run.