If yours is a small software company then marketing niche software may be a very good way to grow your business.
Consider these tips for focusing your software on a clearly defined niche. Then you will be able to deliver a unique selling proposition to your customers and drive business growth.
Let's start with what you shouldn't do: don't go after a large market segment (eg, yet another general project management or contact management software) assuming that even if you get a tiny piece of the pie it's still going to be big enough.
For some reason, too many new entrepreneurs make the assumption that, if the overall market is say $1 Billion, then even if they only get 0.1% of the market that's still $10 Million... a decent business if it's a small enough operation. Who says it's going to be 0.1%? It's just as likely to be 0.01% or 0.001%... you get the picture. Assuming that if you have a functional product then you'll automatically capture at least 0.1% (or whatever your favorite number is) of the market is faulty math. It's just as likely to be 0% if no one has heard of your product (and if there are other big players in your segment, it gets really hard to rise above the noise).
If you're just starting out, the best option is to create a piece of software or a software service that addresses a small usage need within an industry niche that you know, then focus on positioning and marketing niche software that solves that specific usage need really, really well.
If you have some experience in that niche, then you may have contacts that can help you as potential partners or beta testers, you understand the details of the need (and the pitfalls) better than most, and it won't take millions in marketing to get your name out there and win your niche.
Some entrepreneurs worry that if they target a niche that is too small, the business opportunity won't be large enough to grow the business down the road after you've won that niche. I have two things to say to that: First, you should worry about that problem when you have it (or when you're on the path there, at least). It's not a bad problem to have. Second, there are always ways to leverage strength in one niche to get a foothold in a related niche (eg, you start with game/contact management software for Little League teams, and once you have a business in that market you offer a solution for other types of sports teams).
Once you have some ideas for your target niche and your product, then do some market research before you even start architecting or coding the software. It's natural for software developers to focus on the work of building the product, but you first need to make sure the product you have in mind to solve the target usage need is in fact meeting the needs of your potential customers.
Talk to some prospects and get their input on your software plans. This will help you better understand their needs, prioritize specific features or capabilities over others, and eventually it will help you as you develop your sales and niche marketing messages. When marketing niche software, it's critical to really understand your customers and be able to speak to their pain points and needs.
Ideally, sign up a few prospective users or contacts in your niche (industry bloggers, colleagues, etc) to be an informal "advisory board" that you can use to bounce off ideas, give feedback on the software and positioning, and later participate in beta programs and provide testimonials or write-ups for you to use.
The fourth and perhaps most important piece of advice is that marketing niche software requires focus: if you are a small company, then target one niche at a time. Move on to the next niche (or broaden to a larger market segment) only when you are on the road to winning the current niche.
Now, don't take this advice to mean that you shouldn't have a plan for moving forward. Every business should have a plan, including a long-term and short-term strategy in mind, and software businesses are no exception. But make the plan, refer back to it every now and then and revise it as your business evolves, but don't attempt to execute on more than one opportunity at a time unless you have the staff to do so.
Don't fall victim to what I call the "grass is always greener on the other side" strategy. When you're in the middle of dealing with all the challenges associated with growing today's business opportunity, then new ideas that come to you will sometimes look more attractive, simply because you're not in them deep enough to know the pitfalls yet. Don't succumb to the temptation to jump to the new business idea because "it looks more promising."
Even given my advice above to stick with it and focus, there are times when an initial business idea just turns out to be a bad one. You need to know when to cut your losses and move onto the next opportunity. But only do so after some objective, introspective analysis and planning.
And if you make the decision to abandon (or significantly re-plan) your current product or niche, then commit to it and move forward. Learn from any mistakes and move on. Don't second-guess your decision. After the decision is made, it's time to move your focus 100% to the new plan or next product.
For more ideas about marketing niche software, take a look at
this article on optimizing software marketing using market segmentation.