5 Reasons Niche Startups Have an Edge In Every Industry
Updated: Jun 12
I can recall one warm fall evening—years ago, sitting in my bedroom impatiently waiting to watch the latest episode of one of my favorite television shows—ABC’s Shark Tank. As with every episode of Shark Tank, there were a few contestants that appeared before the panel of investors (the sharks) that had some very innovative ideas (there were also a few not-so-innovative ones as well).
As I sat on my desk chair watching the show, my ears perked as soon as I heard a pair of contestants that were making their pitch to the sharks, say that their baked goods store was located in Berkeley, CA. Which is adjacent to my hometown of Oakland.
The contestants—Shannon and Florian Radke, were on the show to pitch the sharks on the idea of investing in their custom gourmet roll bakery, Cinnaholic.
After the sharks sampled the product, the pair surprised them all once they revealed that Cinnaholic was actually a vegan cinnamon roll shop. As with all great business ideas I come across—after hearing their pitch, I instantly thought "What a cool idea!" Followed by "Why didn’t anyone else think of that before?"
If you’re wondering if the Radke’s were able to agree to a deal with any of the sharks on the show, the answer is yes (although the deal later fell apart after the show's taping). But even better than that—Cinnaholic attracted a ton of new customers (myself included) after they found out about the vegan cinnamon roll shop—which was a first for many customers.
Cinnaholic is now a franchise—operating 73 bakeries in the U.S. and Canada. The reason Cinnaholic appealed to so many people is because its niche resonated with a particular audience. Here’s five reasons you may want to position your brand to do the same.
1. Distinction helps identify
Whether you’re already a founder or you're planning on becoming one soon—the moment that you decided which type of product or service it is you that wanted to present to your target audience—your next thought probably consisted of how to make it appealing to them.
This is where niche branding could work to your brand’s benefit.
A true niche brand—like Cinnaholic, is distinctive; therefore, it automatically stands out in the minds of its audience. This, in turn—gives it an attention advantage over its competitors. “In a crowded marketplace, fitting in is failing. In a busy marketplace, not standing out is the same as being invisible.” Says author Seth Godin in his book Purple Cow.
Niche brands also have a social advantage. Because as humans, we love to share cool and remarkable things that we find with others. So, when people come across your niche brand that’s totally different from others in its category—they’ll be far more likely to share information about your brand with others.
As Contagious author Jonah Berger says, “Remarkable things provide social currency because they make the people that talk about them seem, well…more remarkable.”
2. Consumers pay more for specialists…and for niche brands
Steve Kamb is the founder of a very interesting business. After years of struggling with fitness for years—Kamb created a blog about his journey towards a healthy lifestyle—publishing 1-2 articles a week.
I’m sure you’re wondering, "What’s so remarkable about that?" Well, Kamb didn’t just create an ordinary blog about fitness. Instead, he created a blog about fitness to help people that are like himself—a nerd. In fact, he named his website nerdfitness.com.
Kamb didn’t stop there, he went on to convert Nerd Fitness from just a blog—where nerds could chat with one another and learn about health and fitness, gaming, and other hobbies—into a full-fledged business that specifically offers those who identify as nerds: private coaching, diet tips, home training videos, as well as the opportunity to attend the Nerd Fitness training camp.
For 5-days, Nerd Fitness coaches and trainers help nerds formulate the habits and training regimen to accomplish their fitness goals. Prices to attend the camp range from $1,049 to $3,129 per person.
By providing a community for a specific group of people, aka a tribe—Nerd Fitness is able to charge premium prices for their offerings—a luxury not afforded to generalist brands in the fitness industry. To put it simply, it pays very well to be different.
3. Rarity beats apathy
Have you ever gone grocery shopping and noticed that you’ve seen a brand’s product on the store’s shelves for years—yet never tried it? You’ve tried the same product from different brands—but for whatever reason—you’ve never tried that particular brand's product, and have no intentions of ever doing so?
I like to call that sentiment ‘consumer apathy,’ which is a terrible thing for any brand's products that are viewed that way.
Now, imagine how you would feel about a rare product you saw on the same store’s shelves for the very first time. Except this was a product that you considered cool or relevant to your needs at the time, and not only that—there was only one item of the product left in stock at the store at that time!
At that moment, you’d begin to experience cognitive dissonance—purchase the product while you have the chance—or, leave the product on the shelf and take a chance of possibly never being able to purchase it in the future.
That feeling of cognitive dissonance is tension. And it often takes tension to invoke a desired action. Due to sheer rarity, niche brands are much more likely to create tension within consumers than general brands are.
As The 22 Immutable Laws Of Marketing authors Al Ries and Jack Trout put it, "You build brand loyalty in a supermarket the same way you build mate loyalty in a marriage. You get there first and then be careful not to give them a reason to switch."
4. Niche startups are more likely to create a following
Walmart founder Sam Walton once said, “If everybody is doing it one way, there's a good chance you can find your niche by going exactly in the opposite direction.” And while I obviously agree with that statement—I’d go one even further, by adding that not only can you find a niche by going in the exact opposite direction of others—you can also create a following by doing so as well.
That’s because they’ll always be an audience for a brand that goes against the grain. For every group of people that appreciate the status quo—there’s another group that'll appreciate the deviants that represents something new and different. The latter group is called "Early Adopters." And they're a niche brand's best friend.
Case in point, back in 2002—rapper Ja Rule was on top of not only the hip-hop charts—but also the pop charts. Having collaborated on songs with artists like: Jennifer Lopez, Mariah Carey, Jay-Z, DMX, Ashanti, and many others. At the time, Ja was everywhere, and it seemed as if every artist that wanted to appeal to urban radio stations—had to utilize his sound.
However, by early 2003—things drastically shifted once rapper 50 Cent went directly at Ja Rule and his music on his debut album Get Rich Or Die Tryin’. 50 mocked Ja’s harmonizing sound in both his songs and in interviews. All of a sudden—fans who had grown tired of Ja’s reign on the charts had a new sound to get behind—which was created by 50 Cent and his crew G-Unit.
A big part of why people gravitated towards 50 Cent is because he represented a change from the norm—which will always be attractive to those fed up with the status quo.
5. The SEO benefit
Lastly, is the SEO benefit of having a niche startup. The more niche your startup—the better the chances are that it’ll rank higher on search engines for those searching for your niche.
Once again, Take Nerd Fitness for example. I’ll go out on a limb and say that prior to Steve Kamb creating nerdfitness.com—there probably wasn’t a plethora of nerds around the world putting those two keywords in search engines.
Niching worked in Kamb’s favor with SEO—because instead of fighting for rankings with all the fitness blogs on the web—those looking for fitness for nerds could see nerdfitness.com atop their search page as soon as they press enter in the search bar.
Like I always say, nerds do a lot of cool things.