Productized services guru Robin Vander Hayden @Vinrob tweeted this out yesterday:

Pick a big market (e.g. graphic design)

Pick a niche (e.g. marketers at startups with 10-25 employees)

Example, virtual assistants for bloggers, website creation and maintenance for dentists.

I thought this principles summed up perfectly how productized services succeed. As he goes on to share, picking a big market means there’s a proven demand for it. Like say for graphic design, most businesses will need it at some point. The risk of creating a productized service with no market demand is very low. But the challenge is, in big markets with proven demand, competition is usually stiff, services are often commoditized (like how Fiverr commoditized graphic design). How does one stand out from the competition then, by choosing the proven demand of a big market? How does one offer something of higher value that businesses are willing to pay premium for (instead of them going for the cheapest)?

That’s when he points out how picking a niche within a big market leads to better positioning and branding, making you stand out from the competition. Websites creation and maintenance are dime a dozen, but websites for dentists? Now that’s something special. But offering just websites alone is not enough - you got to understand their specific industry needs as a dentist and include features in the website that address just that. For example, maybe one problem dentists have is customers not turning up for their dentist appointments because they forgot. SO having website features like scheduling/booking system within the website and automated email/SMS reminders will address that. Most generic website agencies might not offer that, and even if they do, it might cost more as it’s a custom feature that not all businesses will require. But as a productized service that specialises in dentists, you can leverage on economies of scale, process efficiencies and volume and offer such features at more competitive pricing. 

But by picking a niche, wouldn’t that be narrowing down the potential pool of customers I can have? Truth is, for a dentist website at $10/month, you just need 1000 customers to earn $10k/month. 1000 customers isn’t a lot to ask. There’s probably a lot more dentists in your city than that! So it’s a acceptable trade-off. Slightly narrower pool of potential customers at the cost of higher conversion due to better proposition. So basically, to sum up the princples:

Big market for the task to be done, but

Small niche for the customer segment.