How to Win podcast with Peep Laja

In this episode, Peep dives into why niching down is the key to success for early-stage B2B SaaS companies. He explains how focusing on solving a specific problem for a targeted market, rather than competing directly with industry giants, allows startups to gain traction and dominate their niche. Peep emphasizes that niching down isn't about limiting your dreams, but rather a proven strategy to break into a competitive market and lay the foundation for future growth.

Chapters:
[00:00] - Introduction
[00:30] - Why niching down is crucial for early-stage SaaS
[03:30] - Capturing a small market first
[08:39] - The importance of differentiation
[11:59] - Real-world examples of successful niching
[18:03] - Niching is about focus, not limiting dreams
[22:10] - Case study: Lattice's niche in performance management
[25:28] - When to consider an all-in-one solution
[29:44] - Choosing a company name that allows growth
[31:09] - Identifying a profitable niche
[33:30] - Conclusion


My links:

X: https://twitter.com/peeplaja
LinkedIn: https://www.linkedin.com/in/peeplaja/
Personal site: https://peeplaja.com/
Wynter: https://wynter.com/
Speero: https://speero.com/
CXL: https://cxl.com/

Creators & Guests

Host
Peep Laja
Founder @ Wynter, CXL, Speero. B2B strategy. Messaging. Host of How to Win podcast.

What is How to Win podcast with Peep Laja?

Hear how successful B2B SaaS companies and agencies compete - and win - in highly saturated categories. No fluff. No filler. Just strategies and tactics from founders, executives, and marketers. Learn about building moats, growing audiences, scaling businesses, and differentiating from the competition. New guests every week. Hosted by Peep Laja, founder at Wynter, Speero, CXL.

V2 Niche Podcast
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[00:00:00] Peep Laja: In the early stages of the business, definitely under one million in revenue and probably also under 10 million, the way to win is to niche down, solve a particular problem better than anyone else, become known for one thing. Your goal here is to matter to the smallest viable market first.

Welcome to how to win with me, Peep Laja, a deep dive into studying winners in B2B SaaS to determine how much is strategy, how much is luck, and how do you win?[00:00:30]

Focusing on a specific target market with a specific pain point helps you craft messaging that resonates and stands out in a competitive marketplace. You can also become a specialist product with true differentiation as you understand that one customer better than others. When you nail a niche, dominate the small market segment, and build a customer base of people who desperately need what you have, you gain momentum that aids further expansion goals.

[00:01:00] But will it be hard to expand to other niches later? Will venturing out of what you're known for kill you? This has been claimed so many times, especially in the consumer space. If you read old business books making predictions about the future, a book called Brand Gap by Martin Neumeier, released in the year 2000.

He says there that Porsche's move to start making SUVs will kill them. In reality, SUVs have been the primary growth driver of the brand [00:01:30] for the past decade. The book also said that Amazon breaking out of their book niche is not going well. Well, we know how that worked out. A lot of now big companies gained a toehold in the market and expanded from there.

Salesforce started with a cloud CRM. Hotspot started as an inbound marketing tool back in 2006. It only added a CRM in 2014, eight years later. Podia started as a checkout [00:02:00] for digital products, and now it's an all in one company. Lattice HR started. With continuous performance reviews as their first product.

I did it with CXL and winter CXL. The e learning business started by focusing on conversion rate, optimization, education. Now it has marketing trainings across a whole wide range of marketing disciplines and winter study as a point solution for message testing. According to Sam Altman. Most of the failed startups [00:02:30] during his time as the president of Y Combinator were businesses that went after a large market from day one.

[00:02:37] Sam Altman: Everyone says they want to capture a large market. They want to, they want to dominate a large market. And there are two ways to do that. One is you start with a small market, take all of it over. And then expand. And the other is you start with a large market and take a small part of it over and then expand.

Now, the thing that surprised me is when we looked back at our own data, all of our [00:03:00] successes, I think literally all, started with capturing a large part of a small market. And in fact, I think many of our failures that I was very bullish about failed because their initial markets were too big. In any case, I think what you really want.

Is to find the smallest possible cohesive subset of your market. The most narrow, smallest market you can find. With users that desperately need what you're doing and go after that first Once you take over that market, then you can expand [00:03:30]

[00:03:30] Peep Laja: So you want to take a leaf from the playbooks of companies like it gorgeous Klaviyo and so on gorgeous is Help this software for e commerce companies gorgeous entered the market when Zendesk was already big a lot of help this platforms But they became very big by focusing on e commerce e commerce that was underserved at a time.

As of 2022, it had a valuation of over 710 million dollars. And then there's Klaviyo, another email [00:04:00] marketing software, but with a focus on e commerce brands. When Klaviyo entered the email marketing category, MailChimp was already huge. And they said, we're not MailChimp, we're email marketing for e commerce.

And this, you know, over time helped them become worth 9. 2 billion. Of course, helped by growing in a very large space. When I started ConversionXL blog back in 2011, there were about 7 million or so marketing blogs already. So I [00:04:30] decided that I cannot be a marketing blog because if I'm a generalist marketing blog, it's nearly impossible to compete.

So I had to niche down, I did deep research and decided to specialize on something like conversion optimization, because at the time there were only blogs around. The blog hit about a hundred thousand monthly visitors within a year. And that spun off into my CRO agency later.[00:05:00]

So why is competing with large brands in large existing markets, a losing strategy? Well, there are five reasons. One, it's hard to break into the consideration set already occupied by category leaders. About three years ago, I was chatting with my friend, Brian Dean, an SEO expert. And I asked him, which SEO tools is he using?

Are you using Ahrefs? I asked. He said, no, I use both of them. [00:05:30] Now, at a time, the SEO category had about 285 tools, according to G2, but Brian said he uses both of them. We all know which other one he means. I'm telling you, people have very limited consideration sets of which brands they consider buying. We all have a well developed Box for these tools, tools that occupy a job to be done in our minds.

And that job to be done box or a consideration set is usually occupied by category [00:06:00] leaders, heat maps for small businesses. You think of high char CRM for scaling companies, HubSpot. That's why you need to play a different game. From the category leaders, because you cannot compete with hops, but you don't have the money.

If I want to build a new AB testing tool, it's very hard to enter somebody's mind because they already have VWO you know, one of those tools. So if my tool is. Pretty much the same as all these other A B testing tools. I [00:06:30] just can't break in. It would take insane amounts of money and that wouldn't be rational.

So to break through and get into the consideration said you need to somehow stand out. Category leaders get most of the mental availability in buying situations. So the top five companies in, in most considerations, that's always the big companies with best known products. They have the most awareness and most.

Market penetration.[00:07:00]

The second reason is that category leaders get all the word of mouth. You know, at winter, we recently conducted a study to learn how B2B SaaS marketing leaders buy software. And we learned that 78 percent of buyers shortlist only three vendors to get a demo with. Our study also revealed that 58 percent of marketing executives rely on word of mouth recommendations to build their consideration set.

And they value that input above all else. So if enough peers recommend a tool, [00:07:30] it's going to earn a spot in the final three. And this is bad news for small companies, for upstarts, because you get very little word of mouth. Large brands get Almost all the word of mouth. Just look at any social media thread asking for tool recommendation.

This is going to be like HubSpot, Gong, Salesforce, massive companies. People recommend tools and brands, even when they've never used them. And so if you're Salesforce, you're HubSpot, you're MailChimp, congrats. [00:08:00] You can go home and rest. But if you're just now launching a new CRM, a new email marketing tool, a new live chat tool, you absolutely cannot have the same.

Mostly the same features that everybody else and, and hope that you get word of mouth. Suddenly, no, that's not going to happen. The idea that if a category leader has X amount of features and, and that you can win with X plus one is ludicrous. Minor improvements offered by challengers are not [00:08:30] enough for customers to notice you nor care enough.

to sign up. Here's Elon Musk making the same point.

[00:08:39] Elon Musk: Um, if you're a new company, I mean, unless it's like some new industry or new market that if it's an untapped market, or then, then, uh, you have more ability to you, this, this, the standard is lower for your product service, but if you're entering anything where there's An [00:09:00] existing marketplace against large entrenched competitors.

Then your product or service needs to be much better than that. It can't be a little bit better because then you put yourself in the shoes of the consumer and they say, why would you buy it as a consumer? And you're always going to buy the trusted brand unless there's a big difference. So a lot of times, uh, you know, entrepreneur will come up with something which is only slightly better.

Um, and it's, It's not, you can't just be slightly better. It's got to be a lot better.

[00:09:29] Peep Laja: Competing [00:09:30] on X plus one leads to poor margins and profitability and eventually a decline into irrelevance. In some huge categories, a tiny share might be enough. A friend of mine sold his me to email marketing software.

That was maybe a tool number 40 in that category. And he sold it for like 30 million. So it all depends on what kind of outcome you're after. Third reason why you don't want to compete with category leaders is that they get more ROI. From their advertising spend. [00:10:00] The deciding factor for, for ad spend effectiveness is the size of the brand behind the campaign because bigger brands are better known and they get much, much bigger ROI from advertising, like 20 times more ROI.

It's insane. Not only that, ads run by small companies are often perceived as ads by the large competitors. They get credit for the ad with 0 spend. Reason number four is that category leaders can underspend [00:10:30] their competition and still grow. One way companies grow is when their share of voice is bigger than their market share.

This is known as excess share of voice. Typically, sales volume and advertising budgets tend to move in lockstep. However, Larger companies can underspend their competition and still grow. This was first noticed by the advertising professor, John Philip Jones, and later by Paul Dyson from data to decisions.

Of course, large companies spend more on marketing than small ones. And not just in absolute dollars. [00:11:00] Fortune 500 companies allocate around 11 percent of their revenue to do marketing efforts, while small businesses may only allocate one to 5 percent of their revenue.

Reason number five category leaders, a better position to compete on innovation. Part of the growing divide between big and small firms is the growing R and D expenditures of large firms. The bottom line is, if you compete head on with large brands going after the same customers [00:11:30] with a similar product, you will likely fail.

Large corporations are increasingly likely to maintain their dominant positions while small corporations are increasingly unlikely to become big and profitable. So the best way to get around that is extreme specialization. You niche down, you go after a certain kind of buyer, you create your own subcategory.

A subcategory is a subset of a category like Toyota Prius created a subcategory of hybrid compact cars.

[00:11:59] Prius Commercial: [00:12:00] The all new Prius, Toyota, let's go places.

[00:12:04] Peep Laja: It is the most effective way to differentiate. Everyone loves to talk about category creation, but few understand how expensive that effort is and the kind of innovation you need to bring creating.

new markets and new subcategories is far more feasible for most. That's also what we're doing at Winter. It involves more risk and making bets than traditional way to compete, but with a much bigger upside. To find an opportunity to [00:12:30] develop a new subcategory, you need to create a new set of must haves.

Characteristics early fans truly care about. So the requirements to win the positioning game by building a subcategory are One new or improved must haves that provide a different or significantly better user experience. Two, there's a visible brand driving this. And three, a core fan base, like early adopters jumping onto this and also spread word of mouth.

And the prerequisite for all of this is that [00:13:00] the new subcategory needs to be at feature parity with traditional categories. So for instance, Tesla creating a new subcategory of electric cars, they needed to argue that their battery range was adequate before people would seriously consider the new subcategory it created.

And then Tesla introduced a new set of must haves like crazy acceleration, big screens, self driving capabilities. It used to outcompete other brands. So offerings [00:13:30] without new must haves. Won't be relevant, visible, or credible in case of winter, we deliver insights from B2B decision makers on demand, typically in 48 hours through a self serve platform.

Nobody can match us on these things. And so if you're a buyer who's wondering, Hmm, I wonder what my target customers think about this or this, you can just get the answers in 24 hours. If that is the speed of insights is something you care about and you must have winter [00:14:00] becomes an obvious choice. So when creating a new subcategory winning is then no longer based on my brand is better than your brand but rather on being the only or at least the most relevant brand for this subcategory and competitors lose because they lack the new must haves this subcategory brings.[00:14:30]

The ultimate goal is to have your brand be the only one that is visible and credible with respect to delivering these new must haves. So choosing you over others becomes an obvious choice. Maybe a well known Yeti. Yeti built the premium coolers subcategory. They established themselves as the commercial leader.

And built a [00:15:00] brand and now charges a price premium. Yeti became the exemplar brand that all other premium cooler makers are measured against. If you are going to fight a category leader, what you want to do is attack from below, meaning you go for their least profitable customers or customers from non essential market segments that they don't mind losing.

So they won't fight you on it. You're especially safe when you go for a smaller niche. The thing is, big [00:15:30] companies need to hit certain growth rates For a company that's making $40 million a year, uh, to grow 25%, it needs to find another $10 million of business. Uh, $1 billion a year company needs to find another $250 million.

Your niche likely ain't going to do that, so they don't care. It's the reason small businesses and startups have room in the market. You want to pick a slice of the market where you're not going head to head with the category giants in terms of target [00:16:00] customers, you want to overlap. With the top companies, as little as possible.

Some overlap is okay, but you don't want to overlap with them too much. You don't want to go after their most profitable customers because they have more resources. They have more money, more developers, more everything. So if you're going to directly compete with them and try to get, take their. Best customers, you're gonna lose.

This strategy does not only apply to B2B SaaS, it's a classic business strategy move. This is how Toyota back in the day [00:16:30] entered the U. S. market, by making cheap compact cars. American car makers were making big, massive cars. And so, oh, who cares about the small cars? And in the end, turned out that a lot of people cared about small, gas efficient cars.

Later in the 90s, Kia and Hyundai attacked Toyota and other Japanese car makers from the same angle. They went for their least profitable segment, which is subcompact cars. And Toyota was like, yeah, yeah, who cares? But you know, now Kia and Hyundai are big. So once you [00:17:00] dominate that small segment of the market, the segment where you start, you can gain a toehold, you make money, you have profit, you have customers, you, you get some word of mouth going and you can expand out of there.

Now, you know, today Toyota makes like every kind of car there is same with the Hyundai and Kia, in fact, Kia Telluride is the top selling three row SUV in the U S and this leads me to an important, there's a common misconception, niching down means shrinking your [00:17:30] dreams. If you niche down, you're just limiting your income potential.

And founders sometimes erroneously think that niching down means thinking small, limiting their dreams, permanently shrinking their addressable market. And then the fear of missing out keeps them from specializing and becoming insanely great at one thing. However, companies don't niche down because they have small dreams.

They niche down because it's a proven strategy for breaking In to a bigger competitive market. Here's Aaron Ross, the [00:18:00] author of predictable revenue.

[00:18:03] Aaron Ross: All right. So we're talking about nailing a niche. We're not talking about having small dreams and making small, small markets. So that being focused, it's not trying to do everything for everyone.

It's having the. Discipline to focus in where you can be most successful because it's easier. You want to be like to win anywhere. You need to be a big fish in a small pond and it's easier to make the pond smaller than the fish bigger. In other words, it's easier to be more [00:18:30] focused on who you can help the right situation where you're needed.

That is to try to like change your product or value proposition. So you can just serve everybody.

All successful companies start with some kind of beachhead or initial niche, right? Amazon, they all, at least companies all have big dreams. Plus started though just in books, Facebook, just with Ivy League schools, Zappos and Shoes, and Salesforce. With Salesforce automation, they got a focus in one area.

These are still big areas, but they focused in [00:19:00] some area where they could win before they tried to expand and to do more and more and more types of markets.

[00:19:05] Peep Laja: Lattice hr, uh, went from zero to around a hundred million dollars in revenue and 3 billion in valuation within five years of establishment. And how did they do that?

They went to market first with a single feature. Continuous performance reviews, selling to HR, HR was usually used to clunky enterprise software, very corporate, hard to use, boring software. And then lattice came in with this well designed self serve [00:19:30] beautiful software and gained a toehold in that continuous performance review market.

Then they added a new product, I think every six to 12 months until they became a whole suite of HR tools. And then they moved up market. And then now they're selling to the whole community. HR organization that are example, gorgeous. It's on its way to a hundred million dollars in revenue. It achieved this by focusing on one niche help desk for e commerce.

And of course they got so big because e commerce got big and some niches are definitely bigger than other niches, [00:20:00] but small niches can be okay. So you have to do some math here. Can you get to 10 million in revenue in that niche? In which case I think it's, it's big enough. And also in the end, I think it's important to clarify what do you really want and what is success?

And it really depends on who you are in the game. Cause sure, niching down means that you might not get as big as the giant corporations out there, but was that ever in the cards? Really? Probably not. And I also find it [00:20:30] weird how a company's success is judged. The general lens is that unless you're a category leading company, it's a meh.

If you're not a VC, you should not use a VC lens to judge a company's success, which is a venture scale, 1 billion plus. In my opinion, the correct lens to apply to company success is, is this a good outcome for the founder and other key shareholders? A bootstrap startup getting to 10 million in revenue.

And then maybe the [00:21:00] exit for like 30 to 60 million. That's a hell of an outcome for the founder. Massive success in my book, generational wealth.

Overall, there are two approaches to nailing a niche. The popular approach is niching to solve a specific problem really well. Start with a feature based differentiation and you do the thing really, really well, but feature based differentiation never lasts. So you have maybe two, three years. Cause if [00:21:30] there's a market for this feature, others will copy you.

And hopefully it's not a market leader that can crush you. So you got to build up mental availability in this small market relatively fast, and then expand later. You're not trying to capture every possible customer. You're not trying to be all in one or solve all the problems you can solve. Instead, you focus on serving the customers who desperately need your unique solution.

You focus on a specific pain point and you're focused on becoming insanely great at [00:22:00] that one thing. I've mentioned the brand lattice before. So here's Alex crack of employee number three and former VP at lattice discussing how lattice found its niche in the early days.

[00:22:10] Alex: So when, when I first joined last, last is actually a goal tracking company and it started with, okay, ours.

And it was this idea of how can you build kind of operational excellence at a team. And when that first summer, while you're trying to sell lattice, we noticed what we were selling that. The OKR product teams would probably start internal infighting, right? Trying to align all their different goals. [00:22:30] But while we were talking to customers, we kind of kept hearing this, this trend that was coming up in a kind of adjacent space around continuous performance management, and there was this big shift in HR at the time where people were moving away from the traditional annual performance review.

And moving towards this model of continuous feedback, right? How can you give feedback in the moment when SoTech happens? They pivoted the PO product pretty quickly and started building toward towards that goal. The interesting thing about the HR tech landscape is you have these [00:23:00] direct competitors, like I mentioned, reflective 15 five at the time, but then there's all these HRS providers, right?

Your core HR folks who also, you know, they, they offer payroll and benefits and system of record and kind of all the core HR stuff. And then they kind of did what Lattice did, this more performance management stuff for employee engagement, but they just didn't invest in it. It wasn't a core competency of theirs.

And so it, it lacked some of the customization at last, lacked the user experience. And so we were able to start to kind of, uh, steal customers from our partner with them.

[00:23:29] Peep Laja: [00:23:30] Lattice gained traction by focusing on something the incumbents didn't care much about. Competitors have since caught up from a product perspective, which also goes to show how fickle product based differentiation is.

Being a point solution, aka solving a specific pain really well, is often the right approach. However, there are instances when the right move is to be all in one solution. Here's HubSpot co founder Dharmesh Shah making the same point. What's the one thing that made

[00:23:57] Dharmesh Shah: HubSpot a unicorn? So one of the best [00:24:00] pieces of startup advice, startup founders should focus on one small thing and do that really, really well, better than anybody else.

And that is exactly the opposite of what we did. Uh, when we started HubSpot, we wanted to help, uh, small and medium sized businesses get kind of leveraged out of this new approach to marketing that we call inbound marketing. So we built a content management system, SEO tools and web analytics. So we built literally like all the things.

And so why would we do something so foolish and crazy? And the answer is we were solving for the customer. The problem was that it was just too hard for small businesses to [00:24:30] kind of really put all those pieces together and get leveraged from the internet. Uh, and so that's the problem we. Set out to solve, even if that means building this kind of wide swath of products.

Um, so pick a group of customers that you care about that's large enough, find a problem that they have, uh, that's worth solving. Attach yourself to that problem and that group of customers. But if you solve for the customer, um, that that's not a, that's not a bad way to go. It's work for us.

[00:24:56] Peep Laja: Of course, when I look at HubSpot, Salesforce, and more recently, [00:25:00] Rippling, they supply compelling evidence that all in one is the way to grow really, really big. But focus is still highly useful in the early days. There are exceptions here, like Factorial HR and Unicron out of Spain, that started as an all in one from day one and is still killing it.

But it takes quite a bit of VC money to be able to do that. Here's what Bernard Ferraro Set about why they decided to go all in one from the start.

[00:25:28] Bernat : We were targeting SMB [00:25:30] businesses, uh, and we wanted to target SMB businesses, uh, right from the beginning. And we, we stick to that, to that purpose. And if you go to visit an SMB, the first thing you learn is that you cannot be fixing problem by problem.

No, they want a solution that is complete. And they don't want to have a vendor for every kind of problem they have. So you need to come up with a value proposition that solves many problems at once.

[00:25:57] Peep Laja: But even with an all in one product, they targeted a specific [00:26:00] segment off the market, small businesses, and they focused on one European country at a time, avoiding starting in the U.

S. And even though small businesses seem like a very competitive market, according to Bernard, many of the SMBs that use Vectorial used HR software for the very first time they used it. Also, rather than pursue growth in the US, as most SaaS companies do, Vectorial focused on expanding internationally.

According to Bernard, they recognized that Any European country is [00:26:30] a billion dollar market. So it doesn't make sense to think that the only market is the U S of course, it's the biggest in the world, especially for software. But if you look at Europe, there are many huge markets as well. So after launching in Spain and dominating the market there, they started targeting the European market.

They currently have presence in France, Italy, Germany, the UK, Portugal. And now also United States, Mexico, and Brazil. So focusing on underserved geography is another way to niche down. One thing to remember is that you can't win on [00:27:00] better for everyone. So many B2B SaaS companies continue to say, Oh, we're a better way to do X.

They naively assume that as soon as the target customer sees this messaging, they'll be interested. Oh, wow, this is better. And then, you know, they go ahead and buy you over the category leaders. They won't. Even if you build a brand new CRM that has every single feature that HubSpot has, and maybe even a few more, and you're cheaper, you still won't win.

You won't even break [00:27:30] into the top 20. You will most likely be ignored as more of the same. So you don't want to play the same game as the giants, where they have all the advantages, being objectively absolutely better, is hard, but the relatively better is where it's at. So for instance, winter cannot be the best market research tool because the needs out there can vary a lot.

Winter can be the best market research tool for P2P SaaS marketers [00:28:00] who are looking to figure out what their ICPs want and need and how to market to them in a way that resonates with them. We are definitely a niche company, but also totally differentiated. Word of mouth is a huge driver of growth for our business.

And for the use cases we saw, we get a hundred percent of the word of mouth in the market. It's not like ginormous and out of word of mouth because it's a, it's a small niche, but we get all of it because we are differentiated. Here's a pro tip. Don't paint yourself in the corner [00:28:30] or you might limit your future expansion.

So there is a thing like picking a too small of a niche, like one might be the niche size, like how many people in that niche, but also naming. For instance, Winter was called copy testing and that name described our tools primary function at the time, testing copy. However, we realized very early on that there were several other use cases we could observe with our research panels.

So Winter is basically an ICP research tool. And copy testing is [00:29:00] a form of ICP research, but not the only way. There are other use cases, applications we could build, and now we have built them. And so the name copy testing became limiting because copy testing says what you do. And it kind of makes you, you know, monofunctional.

It painted us into the corner of what you do. The company can be about. So a name can be a limiting factor. In our case, I felt it was going to limit our future growth. And so we renamed the company into Winter. Now it can be whatever we want [00:29:30] it to be. Terminus Sangram Vajra had a similar experience. They called their solution as an account based marketing software, even though they initially provided an advertising service.

[00:29:44] Speaker 10: We did call it that we call it account based advertising internally because our product was an advertising product. So we called it account based advertising, but we never marketed as account based advertising because we didn't know [00:30:00] what else we were going to have, but we didn't know that it's going to be more than advertising.

So we called it account based marketing. Specifically so that it gives us room to grow. And as a result of that, it, it allowed us to do like five acquisitions in the last seven, eight years of our existence, because it allowed us to grow into marketing. It allowed us to grow into customer needs. We had that internal gut feeling that account based advertising will niche us.

Into an [00:30:30] advertising platform while our vision was to build a greater strategy where marketers don't have to be at the mercy of leads. They need to be able to drive business outcomes and revenue. So we are so grateful that we had that hindsight vision on calling it bigger than what it was. A lot of companies, I think get too niche too quick and therefore they lose the opportunity to grow.

And the reality is, If you position yourself too quickly, too narrow, it's [00:31:00] really hard for you to then position yourself too broad, too quickly. So, it's an art and science and I think we were at the right place at the right time in many ways.

[00:31:09] Peep Laja: The big question now is how do you find your niche? Figuring out a profitable niche is easier said than done.

In the book From Impossible to Inevitable, Aaron Ross and Jason Lemkin share five qualifiers for identifying a good niche. A profitable niche has the following characteristics. One, popular pain. What's the main [00:31:30] pain point you solve? Sales generation is not a pain. That's a solution. I don't know what to say to my prospects.

So they would buy is a pain point. And to that end, winter helps you find what the ICPs want to test the effectiveness of your existing messaging to learn what about it works or it doesn't work. Copy is by far the most influential part of the conversion equation. And if words make us money, we should have a way to measure how good the words are.

And that's, that's the use case that we started to solve. So popular pain point, number [00:32:00] one. Okay. Two tangible results. Can you show concrete detailed results? Can you say that your thing grows leads by 50 percent or whatever, as an example, winter customers have been able to increase their willingness to pay 10 X by talking about stronger pain points, or some customers increased their conversion rate by 43 percent thanks to a market feedback, number three, believable solution, buyers here promises all the time.

How can you ensure [00:32:30] that your target customers believe you can deliver and believe that the solution will work for them, including their own ability and capacity to do it? Number four, identify targets. Can you build a list of prospects, channel partners, or marketing options to reach your desired market?

If the answer is no, then selling to your target audience is essentially impossible. And five, unique genius. Avoid commoditization by identifying and projecting what makes you [00:33:00] different. For instance, we're a two sided marketplace. That's how we make the fast feedback loops happen. And if somebody wanted to copy us, they could copy all of our functionality features and so on.

But. Copying all the marketplace dynamics. That's extremely difficult. That's the unique side. That's our moat. Ah, you know, for more detailed, look at how to nail your niche. I recommend you check out that book from impossible to inevitable.[00:33:30]

So in conclusion, diversifying your offering too early does not broaden your appeal. It dilutes the impact of your messaging. It impedes growth and invites a whole lot more competition and is often what kills your company. I recommend starting a niche, dominate that niche, and then expand out when you're ready.

Thanks for tuning in to How to Win, where in each episode I unpack one aspect of winning in B2B SaaS. All your feedback is [00:34:00] much appreciated. For more insights and opinions, follow me on LinkedIn or Twitter.