Introduction to Niche Market Strategy
Potential buyers in Niche Market Strategy are diversified, geographically spread out, and have varying income, social status, and educational achievements.Naturally, many companies devise products or services that cater to a broad audience or to please a large group of people. We call such activity mass marketing.
The advantage many see in targeting the mass market in any product category is that the market is vast. It would be sufficient to run the business profitably, even if one achieves three to five percent of the market share. However, considering the enormous market size, there could be many players with their strengths and weaknesses, and it may take a lot of work to corner even a tiny share of it. Even if the market is significant and diversified, a considerable ad may be required to get noticed in a crowded market.
Therefore, it is not surprising that many existing and new businesses enter a more narrow market called niche market strategy. We call it niche marketing. The niche market strategy may be small compared to its larger counterpart, but competition could be lesser; marketing can be more focused, and easier to develop a business.
According to Linda Falkenstein, author of Nichecraft: Using your specialness to Focus Your Business, Corner Your Market and Make Customers Seek You Out, quoted in Entrepreneur.com, a niche market strategy does not appear or develop on its own; it has to be skillfully created by an entrepreneur. There are niche markets in B2B (Business to Business) and consumer (B2C) markets. Even big businesses focus on a niche market- for example, Walmart focuses on bargain-minded buyers, while Rolex focuses on upmarket profiles.
Experts point out that established and new businesses can find a niche market strategy to grow and prosper. Geoff Dillon, a marketing communications professional based in Toronto, had written a decade ago that a strong position in a niche market strategy is much better than a weak position in a large or mass market.
Defining Your Niche Market Strategy
Following are some niche market strategies:
1. Identifying the target audience (niche market benefits)
You have decided to target a specific audience, and it is not the mass market. From then on, the challenge is identifying the age group, geographical region, the needs the product will cater to, their social status, and related parameters. Here we have to be very specific, according to Linda Falkenstein. And our statements should not be vague such as teenagers, young women, young men, kids or the American fast-food market, or wealthy businessmen looking for real estate investments.
In the case of B2B business, IT marketing firms, the financial services industry, automotive industry all appear too generic and hence need to be more capable of being classified as a niche market. In China, automobile companies selling low-cost electric cars may be an excellent way to define niche market benefits. Likewise, girls in metro cities in India wearing premium jeans in the 13-16 age group with low waist features is a more accurate picture of the target market than teenage girls preferring Western-style garments.
2. How to choose the focus area (niche market benefits)
Upon identifying the target audience, we need to develop the focus area, and the description should not be too general. Many people make the mistake of identifying the most profitable or high-growth industries. A pharmaceutical marketing professional with a decade of experience may not do well in starting a pharma manufacturing unit or a pharma retailing unit. His skill set lies in marketing and hence would do well if he sources medicines from manufacturers and sold under his brand name. Again, investment and risks are higher if the attempt is to target all medical specialties. Suppose the focus is only on cardiac drugs or neuro-psychiatry drugs. In that case, there is a narrow focus, and hence easier to develop the market when the focus is only on cardiac or neuro-psychiatry drugs; it all depends on the domain knowledge and experience of the entrepreneur.
Many people rush into domains that need to be more familiar to them, and the only reason they try it out is that it shows high growth in revenues and return on investment. Trends could change fast, and by the time the new company establishes itself, the positive direction in the niche industry may have changed.
Moreover, a successful trader who suddenly jumps into the IT or software bandwagon just because it’s hot may burn his fingers because of the need for more domain knowledge and expertise. Depending entirely on someone else to run the business from the start, such a person would have a higher likelihood of leading in the wrong direction or being alleged to be cheated.
Falkenstein emphasizes the importance of entrepreneurs creating a checklist of their core competencies before venturing into something new. They have to identify their skills, what work they do best, knowledge area, achievements, and important lessons learned in life. Interest and experience are critical factors in the success of a new venture.
3. Identify the needs of the customer (niche market benefits)
There is a famous business paradigm for success- identify and fill a need. Most success stories in business emerge from a keen sense of identifying a problem and providing a solution. It applies to the software industry, where anti-virus software emerged to fill a need to delete viruses or Trojans that corrupt files or hamper the working of a Personal Computer.
There are various ways to identify the needs of consumers- market surveys, informal talks with potential customers, and secondary data. There are research houses that publish market surveys on niche market strategy areas, and it could be a good starting point to identify your target audience. Sometimes the best method would be to talk directly to customers.
As businesses started seeking a single device that could perform all office functions, multi-function electronic devices with fax, copier, printer, and scanner capabilities rolled into one, replacing the initial photocopiers.
In India, the popular toothpaste of today was initially in powder format. Still, identifying the need for a convenient paste format in sealed tubes opened a new market that has now surpassed tooth powders and other teeth-cleaning solutions.
4. Look for ignored consumers (niche market benefits)
Some target markets need to be covered by existing ones.
Mass marketers can be the focus area for niche marketing. For example, suppose no vendor or grocer delivers fruits and vegetables or cooked food in a particular region. In that case, there is an excellent opportunity to provide such services if there is a genuine need for the people living there. If it comprises older adults residing in high-rise residential flats, the requirement for home delivery of daily-use food and groceries may be higher. Similarly, most health and fitness centers cater to the young; if a particular locality has more older adults looking for exercise and fitness, a wellness center focused on the elderly will gain business.
Many real estate players may ignore first-time buyers looking for affordable but cozy housing. And if there are no such service providers in a city, the focus could be on this small segment where the company can corner more than 80% of the market share. However, the larger real estate market catering to all categories may look more appealing.
5. Synthesize the attributes (niche market benefits)
Once the entrepreneur identifies the target audience, attributes, and needs it fulfills for the customer, they still need to synthesize the qualities of the new product or business.
It should conform to the long-term vision set by the entrepreneur; there is a genuine need for the product, the strategy has been carefully chalked out, the product or service is unique in the market, there is the possibility of developing new products around it even while retaining the core niche market strategy already identified to begin a business.
6. Evaluation (niche market benefits)
After preparing the blueprint for the product and identifying the target audience, the next step is to evaluate the listed synthesizing criteria above. Does it conform to the qualities listed, and if it fails in a few of them, is it better to scrap the product and try something new? The evaluation should enable the businesses to make the right decisions and not be driven by pure hearsay, intuition, and popular perception about a market that may not be true. During this process, it is also essential to consider questions like ‘is affiliate marketing a pyramid scheme?‘ to ensure the chosen strategies are ethical and legitimate.
7. Test marketing (niche market benefits)
Many large companies introduce a new product in select markets and gauge audience response and feedback from sellers before going ahead with the total production of the development or launch of a service. In test marketing, a select group of customers can buy and use the product. In many cases, big companies resort to giving samples free of cost or taking part in trade fairs to gauge market response. Or they could hold mini-seminars to introduce a product and generate feedback from the selected product users. After receiving the input, one must evaluate it and make the necessary changes.
8. Implementing the idea in the market (niche market benefits)
Introducing the product is the final stage in the niche market strategy entry process. Suppose it is a beauty product sold through pharma retail outlets. In that case, produce sufficient quantities, collect orders from retailers, or work closely with distributors to introduce the product. According to Falkenstein, this is the most crucial phase of niche marketing. He says if there is sufficient homework, the launching of the product is only a calculated risk.
Conclusion
Niche marketing has several advantages over mass marketing, especially for new businesses who are not awash in cash. The niche market player is more like a big fish in a small pond, while a corporate entity in a large market is more likely to be a small fish in a big pond If there are many competitors.
Since the product focuses on a niche market strategy that caters to the needs of the small group it addresses, the outcome could impact the market as there is a strong reason for people to buy. A strong position in the niche market helps a company defend itself and enter a new niche market. On the other hand, the mass market will attract more players, and competition will intensify, giving a smaller pie for existing players.
Organic growth is possible in the niche market as consumers will spread by word of mouth the good qualities of the product and refer it to others.
According to marketing experts, a defined market position that targets niche market benefits is a sure formula for success that ensures short-term prospects, cash flow, and potential for long-term business maturation beyond the initial niche position.
First-time entrepreneurs in niche markets must be self-motivated goal-setters with the will and positivity to succeed against all odds. The product or service often has no precedence as it would be a new idea. Hence, the business’s success would depend on the homework; take calculated risks.
Any industry category can develop niche market benefits, including finance, tourism, information technology, beauty and fitness, health, agro-processing, food processing, manufacturing, electronics, electrical engineering, etc.
In recent years, eco-friendly resorts in tourism, organic products in agriculture, Enterprise Resource Planning (ERP) in IT, and dance-based fitness programs in the wellness industry are all good examples of successful niche market benefits segments created.
The ultimate test of a niche market benefits product is how helpful it is for consumers. According to Dixie Gillaspie, writer, and coach, the more the product helps your buyers, the more they consume, the more they refer, and the more likely they will be willing to pay more. Niche marketers can increasingly use the web, social media, and other digital platforms to communicate their messages to the audience. And marketing experts said the return on investment in such new media is better than traditional media.
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