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How Focusing on the Smallest Possible Market Can Pay Off Big

By Marla DiCarlo on October 30, 2019

The views included in this article are entirely the work and thoughts of the author, and may not always reflect the views and opinions of Regex SEO.

Most business owners buy into the myth that they’re just one right move away from being a household brand or company. They dream of virality and becoming an overnight success story. Marketers everywhere promote strategies that guarantee insane results and companies buy the hype.

However, when you peel the layers back, you start to realize that overnight success stories aren’t about luck. They’re not about throwing it all against the wall and waiting for something to stick. Instead, some of the most successful companies in the world did something disruptive. They rejected the mass-market approach and catered to hyper-specific demographics. They played to their smallest viable market.

Everyone likes to think their business or product is the next best thing and appeals to everyone. However, if you try to cater to every person, you will win over no one. The mass-market approach rarely works. Instead, focusing in on a hyper-specific, very small demographic could be the key to success.

What is The Smallest Viable Market Approach?

This business approach is the compilation of a few different marketing philosophies, but it was Seth Godin who fleshed the process out. On his blog, Seth explains,

“Stakeout the smallest market you can imagine. The smallest market that can sustain you, the smallest market you can adequately serve. This goes against everything you learned in capitalism school, but in fact, it’s the simplest way to matter.”

Rather than trying to reach everyone, niche your business to cater to a highly specific market. Why? Because when you do this, you create true fans of your company. Those customers will not only buy everything you sell, but they’ll tell their friends about it. By catering to a small market, you can give the customers exactly what they want and need.

Look at it this way: you could start a shoe company and mass market to everyone who wears shoes. There’s a massive market for that, but every shoe company ever already does that. It’s no way to create super fan customers. Alternatively, let’s say that you start a shoe company that offers high-end, fashionable shoes for women who wear a size ten shoe or larger.

In the latter example, you’re catering to an underserved market. These women will become super customers, buy more than one pair, and tell their friends about it. Moreover, you have the potential to carry other size shoes down the road eventually. Your shoe company could become a household name because you started with a specific focus and created a brand around the smallest viable market.

Finding Your Smallest Viable Market

According to a study by CBInsights, the main reason startups fail is that there isn’t a market need for their product or services. Most startups mistakenly think their product or business is amazing and that people will love it. They pour tons of money, time, and energy into bringing it to market. They finally go live, and no one wants to buy what they’re selling.

This whole approach requires that you do some serious market research. Can you find 15 people that love your idea? If those people are only friends and family, they don’t count. Can you find people who don’t know and love you, who want and need your product or services?

Seth Godin said, “The mistake people make who are trying to market a product, service, or themselves is to make average stuff for average people in a misguided attempt to please everybody.” You have to focus and find a very targeted group of people.

It’s sort of like finding a target demographic or creating a buyer persona. The difference is that instead of doing this after you’ve started your business, you do it before. Additionally, your entire business strategy hinges on these customers, not just your marketing efforts. From your customer service to the way you package your products, it’s all about giving your market exactly what they want.

Breaking Down the Financials

It might seem counterintuitive to go for fewer customers. If you look at conversion rates of almost any marketing campaign, it’s a numbers game. The more people you market to, the more potential you have to convert. So, how does playing to the smallest viable market make financial sense?

Kevin Kelly, the founding executive editor of Wired magazine, wrote an essay titled “1000 True Fans,” applying these same basic principles to the creative scene. He suggested that as a creative, you only need 1,000 true fans to make a good living. All creators (bands, artists, writers, etc.) want superstardom, and like businesses, think that mass-market appeal is the only pathway to success.

Instead, he says to focus on creating true fans. These are people who will buy everything you produce. They’ll buy albums, merchandise, concert tickets, hardback and paperback copies of your book. They’ll buy it all. These super fans should be your target market. Create specifically for them.

Mathematically, if you can create $100 worth of things to offer these super fans, at 1,000 fans, you could make $100,000 per year. If you want to make more, either increase the number of fans, or increase the dollar amount of products you offer each year. Beyond that, these superfans will become ambassadors for you. They’ll help you get more fans, that might spend $25 year, or come to a show.

You can duplicate these same equations inside of a business model. While this is all good in theory, has anyone actually become successful with this approach?

Proof of Concept

Seth Godin, creator of this ideology, used this method to become successful. As did multi-millionaire founder of Copyblogger, Brian Clark. Several businesses have found success utilizing this method, but here are a few notable examples:

  • AirBnB: AirBnB started when the founders were struggling to pay rent and saw a hole in the market. They knew there was a big design conference coming to San Francisco and that hotels would be hard to come by. They decided to turn their loft apartment into a bed and breakfast for designers for that weekend. They hoped to make a few bucks, and they did. Today, AirBnB is worth $31 billion with plans to go public. They started by catering to designers traveling to San Francisco who were there for a specific conference. That’s a tight market. They then branched out to other large events in San Francisco, using their friends’ apartments, and soon, it grew bigger than they could have imagined. 
  • Hypebeast: Founder Kevin Ma started Hypebeast in 2005 to blog about sneakers. He loved shoes, so he wrote blogs about the latest shoes that he liked on the market. He wrote for other fifteen-year-old boys who liked the same sneakers he did. Today, the website posts around 40-50 articles daily, and has around 5.4 million unique visitors per month. It’s now a company known for taste-making, and they make millions in eCommerce and advertising.
  • Seth Godin’s Wife has a bakery called “By The Way Bakery.” Everything on the menu is dairy-free, gluten-free, and kosher. That’s a very specific market and it could have been limiting and tempting to branch out. However, by sticking to her tight market, she built the largest bakery of its kind and now has four locations and 65 employees.

Other notable examples include: Apple, Disney, Amazon, Twitter, and Virgin Airlines.

Getting Started

If you already have a business, dig in and do some research. See who your super customers are and start building your business and products around them. If you’re still in the brainstorming phase, do some market research. Try testing ads for potential markets before you have something to offer.

Rather than trying to reach everyone, figure out how to reach the people who want what you’re offering. Get laser-focused and give people unique products, specifically catered to their needs. Starting with the smallest viable market could actually be the secret to overnight success.

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