Market penetration, choosing the right vertical (or – joining Morpheous, Neo, and the rest of the enlightened)

Hopefully you are convinced that you need a strategy that includes starting with a vertical market niche that will help you take the whole market by storm.  Unless your name is Steve Jobs, this is the first stepping stone of any market penetration. Steve is in the position to make stuff with a coolness factor so high and he has branding so strong that he doesn’t need to do much except for announcing it.  If you think that your product announcement will have the same effect as his, you need to take the Redpill and join the liberated ones that are living in the real world fighting the sales & marketing battles against the agents (guess what movie I watched again last night?).  If you’re not convinced that you need a market niche to begin with, read this.

So what are the makings of a vertical market that you can dominate, and that can be your first stepping stone to conquering the universe?

  • It’s a vertical market that has a clear & obvious problem that your software application can solve.  This problem is a burning pain that would be a “must solve” if a solution was available. The existence of this problem in this vertical means that you will be able to very easily position your software as a money-spending-worthy solution.  You don’t want to be in the position where you convince the customer that he has a problem – if you are just starting out, you don’t have the bandwidth for that.
  • You can easily identify the person that owns the problem within the organization, and if you go to different customers  it is the same person/role that has the pain. This means that you always know who to sell to, which will save you huge amounts of time when trying to find the buyer in the organization. It also means that you will get to know this person’s problems and what are the right solutions and messages that you need to provide in order to solve his problems. You will know what you need to do to make their day better.
  • It’s a real vertical niche community, not one that exists only in theory.  In other words – it’s a community of organizations that share the same characteristics, and where personnel from different companies often meet in different business gatherings, deals, conventions, change employers, etc.  An example for such a niche might be “law offices specializing in real-estate in the eastern US”, or “respiratory medical device makers with less than 500 employees”.  The people in these niches read the same professional articles & media (opportunity for high impact / low cost marketing for you), meet at different functions, change employers but remain in the niche, and ultimately – serve as great references to each other and spread the good word about your software.  An example for a niche that is much more theoretical and difficult to identify is “organizations with 500 people or less that need to manage their projects (how do you find them? Who owns the problem? What exactly is the problem and can we really solve it without tailoring the software? who has the budget? who would you competing against?…   Etc. etc.)
  • The vertical needs to be one that can be used as a stepping stone to other verticals.  This is only the first niche and you need to expand, your purpose in conquering this segment of the market is to establish a base and move forward from them.  You need to make sure that you haven’t stepped foot onto an island.  If your real target market is all companies that are developing SaaS software and need a virtual hosting solution but chose your first vertical as being small law offices that need remote storage, you will find yourself working very hard to expand towards your real market.  An alternate target market might be software companies in the valley that are developing a SaaS applications based on Microsoft technologies.

In the coming posts I’ll publish examples of good verticals (i.e. where you will solve a real problem, your customers will love you, and you’ll be the biggest fish in the pond) and less than optimal verticals (i.e. – ones that suck because you’ll spend a ton of money trying to solve the customer problem and to make a name for yourself)

Till then, I’m gonna go watch The Matrix Reloaded this post is getting too long…

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