Why you need a niche for your engineering or software development services company, and what to do about it

For Engineering Services, Software Development, and Industrial Automation Companies

The main reason you need a niche: survival as a business.

Your customers and the market as a whole will demand you specialize more and more.

Our expectations are being modified by the internet, mobile devices, social media, and search engines. If someone finds your company, you need them to be able to understand how you’re different from other companies they’ve found.

The bar is continuing to rise.

People want the information they’re seeking. They want it now, and they want it succinctly. If they don’t see what they’re after immediately, they’ll look elsewhere.

This doesn’t mean you have to completely stop doing business the way you’ve done it for years at the drop of a hat… It does mean you need to evolve.

So how come this isn’t more obvious to some engineering / software services companies?

  1. Repeat business.
  2. Inward thinking bias.

Repeat business

Repeat business can skew your view of your own business because it likely occupies a large portion of your revenue. These customers have been with you for years or maybe decades, and if you keep them happy, they’ll likely keep coming back.

Your long-standing customers may have found you by meeting you at a trade show or being referred to you by a friend, colleague, or partner channel.

I’m not saying you can’t or shouldn’t continue to obtain new potential customers through referrals and partners. You should (especially referrals). Trade shows are more case-by-case. If they’re working, do it. If you do a good job capturing lead source info and you don’t think the trade show is worth it, skip it for a year and see how you feel afterward.

If you don’t attempt to track lead source closely, start now. You’ll need this info as part of a feedback loop to influence your decisions about what to do more or less of over time.

Inward-thinking bias. You aren’t your customer

People (including business owners) often try to use themselves as a data point to justify the behavior of their customer.

First of all, using any one person as a data point to influence business decisions is generally dangerous.

Second, and even more important, you aren’t living their world, feeling their pain, their needs, their motivators, living their budget cycles, etc (at least not directly; although you should be trying to better understand through feedback).

You’re personally getting older every day, and in many cases your potential customer isn’t (new people enter the roles you sell to all the time). This is super important. Why? Because the gap between your personal preferences and your potential customer may be widening.

I don’t blame you for not preferring this pace of change in buyer behavior. Much of it can be frustrating at first. But it also creates new opportunities to:

  • make your customers happy,
  • gain new customers,
  • and separate yourself from the masses.

The internet, search engines, mobile phones, and social media (with generative AI as the up-and-comer) combined have drastically changed the way humans in most of the world do three things:

  1. Learn
  2. Communicate
  3. Buy

It’s hard to think of three more fundamental elements to engaging a potential customer than to understand how they learn, how they communicate, and how they want to buy.

Information is widely accessible and flows with ease. The main problem more often than not is that there’s too much information, vs a lack of it.

Attention spans, as well as patience, seem to be decreasing.

How will more of your potential customers learn going forward?

  1. Search engines (e.g. Google, Bing, Duck Duck Go, Brave)
  2. Generative AI chat platforms (e.g. ChatGPT, Bing Copilot)
  3. LinkedIn posts tied to affinity groups
  4. LinkedIn posts fed by an individual’s network
  5. Friend and colleague conversations

How do more of your potential customers want to communicate going forward?

  1. Your website
  2. 1:1 email
  3. Audio / video conversations
  4. Texting

The buyer’s journey – an increased need for one or more niches

People are getting more and more used to getting what they want, when they need it, and they’re getting more comfortable searching for what they need vs relying mostly on trusted networks of people.

No need to keep a list of potential service providers, or meet with sales people years in advance to know if you’ve got a good potential supplier to pull from.

Just google it (or Bing it, or ….).

This means you want to be ready ahead of time to show up when your customer has a need.

Your customer’s going to search for a solution to their problem, however they think they’re most likely to find it (not necessarily in the way that you want to describe yourself as a company). The buying process resembles:

  1. learning about how to solve my problem,
  2. seeking options from service providers,
  3. digging in on validating potential options.

I’m oversimplifying here. The reality is messy.

You don’t want your potential customer to have to work hard to understand if you might be a good fit to solve their problem. Your potential customer wants it to be clear, quickly.

Geography is becoming less of a consideration for who we should do business with.

  • Video conferencing is pretty much second nature for most at this point.
  • Cloud-based collaboration is no longer bleeding edge.
  • Remote access to client sites is feasible.
  • Flights (if needed), are reasonable, and ride sharing or public transit will get you the last couple miles.

How to determine a niche to experiment with

Determining a niche(s) to experiment with is a complex aspect of marketing strategy. There’s a lot of nuance and context to consider. Having said that, here are a few tips to start framing your mental model.

Determining potential niches involves figuring out where the following elements sufficiently overlap to satisfy your risk tolerance:

  1. Solving real problems – Where do you add the most value to a significant subset of your customers?
  2. Market size – Do you believe there are a significant number of companies that have these problems? Are they willing to pay you enough?
  3. Differentiation – Where are your strengths relative to others in your broader space? This doesn’t mean literally zero competitors. In fact, if you’ve got zero, that’s a caution flag. At the other end of the spectrum you want to be mindful that there aren’t so many players that you’re commoditized. If your potential customers have trouble seeing why they should pick you over many other companies, that can be an issue.
  4. Passion – Are a significant subset of your employees actually interested in what they’re doing and why they’re doing it? You’ll likely see a non-negligible difference when your team is doing work they’re really interested in vs doing work solely for a paycheck.
  5. Finding potential customers – Do you have some idea of where to find potential customers within this niche?
  6. Engaging potential customers – assuming you can find potential customers, do you have decent thoughts about how to engage them? What do they care about? What do they need / want from you? How can you build trust?

You need corresponding solutions defined in the way that your potential customer describes their problem.

I don’t care if your company can solve several problems. That’s fine. When a potential customer has a need and they’re looking to solve that 1 problem, I want them to find you in the manner in which they view their 1 problem with as little effort as possible.

You don’t want them to have to search around some gigantic matrix menu on your website or get confused because there’s too much text or the words you use aren’t the words they would use.

It should be immediately apparent when a potential customer finds you that you’re a good potential way for them to solve their current problem.

You can solve other problems for them in the future, but for now, it’s all about the one.

Once it’s clear to them that they’re in the right place, you need to start building trust immediately.

If you’d like help marketing your niche(s), feel free to reach out for a chat.

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