This has been covered over and over, but there is good reason for that. Defining the segment of the population you can best serve is important. Knowing your niche means you'll know your market, what they want, how much they'll spend, etc. Often, you'll personally fit within this niche yourself if you are a start-up or entrepreneur. In larger businesses, or after the first product in a new company, you'll often design products to fit into that same niche.
Some very common products today came from niche products, they just got popular and are no longer used solely for their intended purpose. Take the carabiner, for example. It was invented by a German climber for, you guessed it, climbing. The idea of it being on backpacks and as a keychain for people who have quite possibly never gone even hiking, wasn't even a thought for Otto Herzog, it's inventor. It was a very niche product (estimated 2.7% of the American population in 2009 participated in some kind climbing or mountaineering) and far fewer people would need a carabiner rated for human use.
One great reason to define your niche is to avoid wandering from it. Wandering from your niche can have disastrous brand repercussions, as some companies who have attempted to expand their market segment. It sometimes works but must be thought through. To even think that process through to know if it would work out well, you must know your niche.
Product feature creep is something that can be avoided by knowing your niche. If you designed a product for snowboarders, maybe it could cross over to skiing, but would you want to factor in a diesel mechanics needs into your product? Probably not, I'd at least heavily advise against it unless you were targeting only snowboarders who are also diesel mechanics. It's easy to try to make your product into a Swiss army knife, but that leads to excessive features that your core user won't want or need.
Good marketers and developers will ask you what your target market is, target user, etc. If you already know the niche you want to enter is, then right there a lot of the information required to properly design and develop a product. Through the development process, and then marketing, you might find that you do service a few niches.
Bringing this kind of direction to your developer, or at least having an idea of it, will help the process of developing your product. It will also help your business and guide you toward success. Defining your niche is something you don't have to do alone, but at least knowing a direction will help people help you define it.