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You are here: Home / Business and Strategy / Niche Marketing: Meaning, Advantages and Disadvantages

Niche Marketing: Meaning, Advantages and Disadvantages

Updated on April 14, 2022 by Ahmad Nasrudin

Niche Marketing Meaning Advantages and Disadvantages

What’s it: Niche marketing is an effort to promote and sell products to target customers in a narrower market (niche market). Companies adapt their marketing mix and marketing strategies to meet specific wants and needs in that market.

The size of the niche market is small because it has fewer customers. Consumers in the market have their own unique needs, preferences, or tastes. Luxury brands worldwide, such as Louis Vuitton, Chanel, and Hermès, rely on this strategy to make money. Likewise, the organic food market is a good example of a niche market. Sales in this market are relatively limited compared to the mass market.

Difference between niche marketing and mass marketing

Under niche marketing, companies develop other products and marketing mixes specifically. They take a marketing differentiation approach instead of standardizing marketing for the mass market.

Market needs are unique. Customers may be looking for a specific combination of benefits from a product, such as self-actualization.

Companies rely on concentrated marketing campaigns to gain in-depth knowledge of target niches. That way, they can ensure the product is more suited to customer tastes.

In contrast, under mass marketing, the company serves all consumers without differentiated products and marketing mixes. They do not divide their target market into separate and smaller market segments.

In the mass market, companies rely on sales of standardized products. They rely on high sales volumes to compensate for the low-profit margins per unit. It allows them to lower their average costs by achieving higher economies of scale.

Advantages of niche marketing

Focusing the resources. Because it serves a few customers, the company can focus more resources on exploiting its target market. That results in higher marketing effectiveness.

Less competition. Marketing strategy involves targeting markets outside the main market. The company will target specific market segments, which large companies are less interested in entering.

Large companies do not want to enter because the potential profit rate may be low relative to their business size. Hence, this segment has a loose level of competition and allows companies to set premium prices.

Feasible for smaller companies. Niche marketing is beneficial for companies with relatively limited resources. They can survive and thrive in the market and do not have to compete directly with large companies in the mass market.

High-profit margins. Low competitive pressure allows companies to sell at high prices and earn high-profit margins. They offer exclusive products, making consumers willing to pay higher prices.

High loyalty. Companies have a higher chance of satisfying customers. They specialize in satisfying the specific needs and wants of consumers. The success of exploiting the market brings a stronger relationship between customers and the company and brand.

Downsides of niche marketing

Low economies of scale. The market has few customers because of more specific demands and needs. Therefore, it is difficult for firms to catch up to lower average costs by increasing sales and production volumes.

Low barriers to entry. Entry requirements are relatively low because they do not rely on significant capital investment. Therefore, in some markets, firms face a high risk of entering new players into the market, increasing direct competition.

Product perfection. The marketplace requires companies to develop perfect strategies and provide better solutions. Because there are fewer prospects, there is less room for error. The company must be able to provide products exactly what the customer demands.

Topic: Marketing Category: Business and Strategy

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