What is a niche marketer?
Niche marketing is sometimes a misunderstood term. Basically, niche marketing refers to competing within a narrowly defined market segment with a specialized offering. In essence, the firm virtually becomes a ‘big fish in a small pond’. The firm’s competitive advantage comes both from its expertise (as it’s a specialist) and from having a high market share (of a relatively small market segment). As a result, many potential competitors do not deem it viable to directly compete against niche marketers.
Niche marketing is a somewhat rare strategy to implement and the term is sometimes confused with one-to-one marketing (discussed below) and being a small market player. Most small businesses are generally not niche marketers; they simply have a very small share of a large segment (whereas niche marketers have a large market share in a small/tight segment).
Definitions of niche marketing
Some traditional textbook definitions for niche marketing include:
- “A small market that is not served by competing products." (Keegan, Moriarty, & Duncan, 1992)
- “A method to meet customer needs through the tailoring of goods and services for small markets." (Stanton, Etzel, & Walke, 1991)
- “The customers in the niche have a distinct set of needs; they will pay a premium to the firm that best satisfies their needs; the niche is not likely to attract other competitors; the nicher gains certain economies through specialization; and the niche has size, profit, and growth potential" (Kotler, 2003).
You will note that the key emphasis of these definitions is the focus on small market (segments). Two of the definitions also add that there is an absence of competitors. However, these definitions do not explicitly highlight the importance of expertise and specialization in being a successful niche marketer. This skill set and focus is a critical component of the firm’s long-term success as a niche marketer. Therefore, a more appropriate definition of niche marketing would be:
- Niche marketing is a specialized market offering focused on the needs of a tightly-defined market segment.
Why do some firms become niche marketers?
Achieving success as a niche marketer is a challenging and risky strategy. The major risk is that the firm is reliant upon a relatively small market and is so committed that it does not have much diversity of revenue streams. So to some extent, they are somewhat vulnerable to market downturns, new competitive entrants, and substantial changes in the market environment.
Therefore, the question is: if niche marketing presents such risks, then why would some firms choose to pursue this strategy?
The answer to this question is that being a niche marketer (if successfully implemented) has a number of significant advantages, as highlighted in the following table.
Niche Marketer Advantage
|Little/no competition||A successful niche marketer can successfully dominate their targeted small segment market to such an extent that they “own it" and virtually have no competition and the threat of new entrants is also very low.|
|Strong relationships||Niche marketers will build strong relationships with many of their key customers over time, which further protects them from competitive threats.|
|Business stability||These firms typically have strong customer relationships and little/no competition, this equates into a very stable business that generally does not experience major fluctuations in performance.|
|Improved capabilities||As these firms are also usually experts in their field, they constantly add to their skill sets and capabilities. This builds their competitive position, making it even less likely that they will be challenged by new players.|
|Focused business||These firms do not waste time/effort in seeking out new opportunities or dramatically reviewing their marketing strategy. Instead, because they are so well-defined, they stay focused and committed to their core business.|
|High profit margins||Their profit margins tend to be higher because customers are less likely to consider the price as a determinant attribute – they are using the firm as they clearly provide the best solution for them.|
Are niche marketers always small firms?
Niche marketers do generally tend to small to medium-sized organizations, mainly due to the fact that have deliberately focused upon a narrowly defined segment. However, there are exceptions to this general rule of thumb.
For example, in its early days of operation, American Express essentially operated as a niche marketer. They offered high status charge cards (not credit cards) to high income consumers in professional and senior management occupations. This meets the definition of a niche marketer: providing a specialized offering to a defined target market. However, American Express was able to duplicate their success as a niche marketer in many countries throughout the world.