In the early days of launching a new product, it’s useful to think about your market in terms of “pockets of demand”.
A pocket of demand is of course another way of saying “target market”. It is essentially identifying a group, or niche, of potential customers who share a common problem that you can solve extremely well: people for whom your product is the greatest thing in the world.
The advantage of thinking in terms of a “pocket of demand” is that it encourages you to focus on that pocket, that core market, even when this is potentially to the detriment of the broader market.
But why is this a good thing? Because when you are trying to nail product market fit, thinking too much about the broader and adjacent markets can often lead to a tendency to want to solve too many problems at once. No market is completely homogenous, and you might start making too many compromises instead of focussing on what’s truly important for your core target market.
Knowing your pocket of demand can also help you optimise your go-to-market strategy to find exactly these customers, which can help lower your customer acquisition cost.
In Peter Thiel’s book Zero to One, Thiel talks about the early days of Paypal. Their first target segment – their initial pocket of demand – was Ebay “PowerSellers”. From the book:
“We set our sights on eBay auctions, where we found our first success. In late 1999, eBay had a few thousand “PowerSellers”, and after only three months of dedicated effort, we were serving 25% of them. It was much easier to reach a few thousand people who really needed our product than to try to compete for the attention of millions of scattered individuals.”
They zeroed in on the needs of that niche, and solved their problem – safe, cheap and fast online money transfers – and only after they had nailed that did they expand the value proposition to include broader slices of the market.
When it comes to growing your customer segment, you have two choices:
- Try to expand the penetration of your product within the pocket of demand you’ve identified, or
- Expand the offer to adjacent pockets of demand.
When Amazon started out, Jeff Bezos had a vision: to build the “Everything Store” – an online store far bigger, stocking more items, than any physical retail store ever could. But the first years of the company focused on a specific pocket of demand: readers. They spent a couple of years expanding their selection of books before expanding into other retail categories.
What is the pocket of demand that you are addressing?