Are Medical Niches a Trap for Founders?
Not necessarily. Splenda launched in the United States as an ingredient in branded product launches like Diet V8 Splash. When it came time to market the table sweetener directly, McNeill chose two groups: diabetics and middle-aged, weight-conscious women who like to bake.
“The target audience is mostly women 35 and older, with busy lives involving lots of demands on their time and yet an inclination to bake. Diabetics are also being singled out through the company’s Web site and other efforts with doctors.” (NY Times, Oct. 26, 2000)
Think of diabetics as the easy way to seed word-of-mouth for a new artificial sweetener you can bake with (unlike market leaders at the time).
McNeill had a short-term audience with a niche outcome (blood sugar regulation) AND a longer-term audience to drive scale via the weight management outcome.
If your product line emerged to solve a specific chronic medical issue, ensure that it delivers against a much more popular long-term outcome, one not tied to ANY chronic medical condition. AND make sure that no pharmaceuticals have emerged to solve yesterday’s chronic problem.
Generally, you want to target a consumer outcome of great interest to 30-40% or more of the population. A medical niche may garner you 2-10% on average.
While it’s true that you can build $100M premium consumer brands with only 2-4% of HHs, this is for innovations with high unit consumption frequencies on a weekly basis.
If you do have a small HH niche in your original medical niche audience, you may still be able to scale within it, BUT you will have to reduce pricing earlier than desired in most cases. This could end growth if you didn’t fund those price decreases. Believe it or not, even consumers with chronic health issues display similar price sensitivity as the average consumer. Most will not pay a premium despite the promised results. Instead, they’ll continue to manage their symptoms reactively because it doesn’t interfere with cherished dietary habits.