“The real question isn’t how well you’re doing today against your own history, but how you’re doing against your competitors.” —Donald Kress
What is a ‘niche market segment’? A niche market segment is a specialized segment of the market for a particular product or service. The specialized segment refers to the target market or niche that appeals only to a few specific members in the entire market.
There are two strategies for catering to a niche market segment:
Niche Marketing
A focused Low- Cost Strategy
A focused low- cost strategy looks at serving the niche market through a strategy that works on serving the customers at a low- cost and low- price as compared to its rival competitors. The advantage comes from the fact that the firm can lower its costs in a significant way by focusing on the niche market segment. The buyers of the company are limited as it is serving a specialized segment, and this eventually helps in reducing the cost for the company. Other strategies that a company can use to reduce costs include outmanaging rivals in order to keep the costs at bare minimum and reducing the extent of non- essential activities.
Examples of a Focused Low- Cost Strategy
Coco Cola Diet Coke
Coco Cola introduced diet coke at a reasonable price for its niche market segment that comprised of those customers who have an interest in a low- sugar cola drink. This strategy made Diet Coke a huge success in the market as the drink catered to a specialized segment and was offered at a reasonable cost to the targeted customers. Diet coke was initially launched in only six markets in the United States, but the popularity of the product motivated the company to launch it in all the major regions across the world. At present, it is one of the most successful brands owned by Coco Cola and its success can be owed to the excellent distribution network used by Coco Cola to market the product. The product is now easily available and accessible to every customer. The pricing strategy initially used was Price Skimming, but later when the competitors for the product increased in numbers the pricing strategy was changed to competitive pricing strategy. Diet Coke today uses focused low- cost strategy for the niche marketing of its product.
Walmart
Walmart as a retailer has established itself in the market by creating an image that speaks of Walmart as a company that brings products to its customers at the lowest possible price. This image works well with the market segment of consumers who have a deep interest in purchasing products that come with maximum discounts and offers. According to Business Insider, India “While Amazon offers cheaper pricing on some items, a 2018 analysis by Clark found that Walmart’s products are about 34% lower priced than Amazon’s.” Walmart can provide a low-price benefit to its customers because it has managed to keep its operational costs at a minimum level with these practices:
Using a sophisticated and largely automated supply chain management system.
Maintaining a basic in- store design.
Large customer base in the local area where the stores are located.
Making company executives use budget travel options for work purpose.
Amazon
As an e- commerce company Amazon has definitely established itself as a company with a wide online distribution network. Amazon has not invested in any physical location stores, and this gives it the advantage of bringing the products to its customers at a lower price than its close competitors. It caters to the market segment that is interested in home delivery of essential items at the lowest possible cost.
Focused Differentiation Strategy
A focused differentiation strategy looks at providing unique services to a specialized segment in the market. This market is the niche market segment or the premium market segment for a focused- differentiation strategy.
Musical Instruments
Companies that make musical instruments cater to the niche market segment that comprises of consumers who are interested in music. A company manufacturing high- quality guitars would like to spend its marketing efforts on the market segment that comprises of professional guitarists. They are the ones who have the capability and the desire to spend on a high- quality and expensive professional guitar.
Luxury Vacation Resorts- Hyatt and Taj
Have you ever wondered why big 5-star resort companies like Taj and Hyatt have membership rewards for their premium members. This is because serving a niche market segment builds customer loyalty and these resort companies know the value of their existing customers. There are resorts which cater to couples without children and such resorts create a premium high- quality product offering for their customer segment and offer it to them at a higher cost than their competitors in the market.
Designer Jewelry Stores- Tiffany and Co. and Bulgari
Another premium market segment where the designer creates unique designs for its niche market segment is designer jewelry stores. Companies like Tiffany and Co. and Bulgari market their products to the niche market segment which has demand for expensive designer jewelry.
Designer Boutiques- Coco Chanel and Tom Ford
Fashion stores like Coco Chanel and Tom Ford sell their premium creations to their niche market segment through their designer boutiques. They have a market segment of high- end customers who have a demand for trendy, designer clothes and these customers buy their products from their favourite fashion stores at a premium price.
Whole Foods
Whole foods targets customers who are ready to pay a premium price for health and fitness products. Shoppers believe that the brand they offer at a premium price for health freaks has a premium quality and this makes up their niche market segment.
Advantages of Niche Marketing Strategy
Niche marketing helps a company in gaining customer loyalty.
Niche marketing allows a company to stay out of the tough competitive market, as the product or service offered by the company caters to a specific target market. This reduces the marketing budget of the company and the company can provide even lower prices to the customers.
It is easier to achieve Brand Visibility with niche marketing, as it helps a company to stand out in a tough competitive market.
Social media fan following and word- of – mouth publicity helps in increasing the followers of a company that practices niche marketing.
Drawbacks of Niche Marketing Strategy
The target market for the company’s product or service is limited and to expand its market base a company has to spend on innovation and technology.
Competition sometimes might be very fierce in a limited market space where a popular product might see too many companies entering the small market space.
Niche market strategy has been used by various companies and the success of the strategy lies in creating a product that can cater to the niche market segment. Niche market segment is profitable as it involves lower costs for marketing and sales, but it also involves a huge amount of consideration for factors like supply chain and proper management of customer loyalty.
Keep working ,fantastic job!
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