Market niche

A niche market is the subset of the market on which a specific product is focused. The market
niche defines the product features aimed at satisfying specific market needs, as well as the price
range, production quality and the demographics that it is intended to target. It is also a small market
segment. Carving out a niche market and positioning yourself as the go-to brand for a specific
customers not only establishes your credibility over competing generalists but also results in a
more focused business.
What is a niche market?
A niche market is a segment of a larger market that can be defined by its own unique needs,
preferences, or identity that makes it different from the market at large. Nearly every market can
be further refined, or divided, by the specific needs and preferences of its constituents. Choosing
to focus on a niche is thus a strategic business decision to serve a certain customer base better than
competitors who target the larger market.
Not every product can be defined by its market niche. The niche market is highly specialized, and
aiming to survive among the competition from numerous super companies. Even established
companies create products for different niches; for example, Hewlett-Packard (HP) has all-in-one
machines for printing, scanning and faxing targeted for the home office niche, while at the same
time having separate machines with one of these functions for big businesses.
The final product quality (low or high) is not dependent on the price elasticity of demand, but the
specific needs that the product is aimed to satisfy and, in some cases, aspects of brand recognition
(e.g. prestige, practicability, money saving, expensiveness, environmental conscience, or social
status). When there are needs or desires with specific and even complex characteristics, the market
niche requires specialized suppliers which are capable of meeting such expectations.
Most common ways to define a niche are based on;
a) Price - luxury, moderate, discount
b) Demographics - gender, age, income level, education level
c) Level of quality - premium, handmade, economical
d) Psychographics - values, interests, attitudes
e) Geographic - residents of a certain country, city, or even neighborhood
How to evaluate niche market ideas
When the seller identifies what to sell, there is need to make sure there’s an customers for it. At
the start, niche market and products are just ideas—a hypothesis of what the seller thinks will
resonate with target customers. While targeting a niche as seller’s focus will make it infinitely
easier to find potential customers and convince them to buy from him, the seller needs to be sure
there are enough buyers in that niche to make it viable. If he determines that the niche is too small
to generate reasonable interest and profit, he should consider pivoting to a different customers
within that niche or promoting a different product.
Even if the seller achieves success early on, niches change, and it’s up to him to evolve with the
customers and adjust positioning over time. He might even introduce new products to his line as
opportunities present themselves.
Some of the ways to evaluate a new niche market idea include:
a) Testing before investing – the seller should start with a small batch of products and run a
campaign to targeted customers. He should solicit feedback from customers who have
made the first purchases or send a few out to influencers and ask them what they think. It’s
important to get feedback early on, especially if one is developing a new product, so it can
be perfected before it goes out to the rest of the world.
b) Digging deeper into the niche – the seller should expand the niche product market and
regularly assess performance to address emerging concerns.
c) Researching consumer trends in the market - it’s important to be up to date with what’s
happening in the chosen niche. Regular feedback mechanisms will help understand
consumer pain points, desires, and breakout trends.
How to find a niche product
a) Reflect on passions and interests – the seller should take some time to reflect on those areas
of interest as potential niche market ideas. Some of the questions to be asked include what
skills come naturally, how one enjoys spending free time, how one approaches problem-
saving, topics one enjoys learning.
b) Identify customer needs – the seller should think of the problems faced by target market
and how his passion or interest can become a product or service that meets their needs. He
should research potential customers to determine their buying behaviors and the challenges
they face.
c) Research the competition - before devoting his time and energy to developing a brand new
business, a seller will want to research his potential competitors. He might have a viable
product idea, but how many other businesses will he be competing with? He should these
tools to explore the best-selling products consumers are researching and see if his new
business can meet their needs.
d) Define niche and profitability – if the seller is dedicating his resources and time to a new
business, it should have the ability to become profitable. Factors to consider when
finalizing the niche include customer demographics, customer values and interests,
customer location, product quality and price.
Importance of niche marketing
a) A niche helps establish a loyal customer base - solid market niche helps ensure that specific
customers will want to buy from the business instead of the competition. A niche allows
them to identify seller’s product and brand, and know that his offer suits their needs.
Additionally, focusing on a smaller target customers lets the seller concentrate on the
quality of his customer service and establish a long-lasting relationship.
 b) It minimizes competition - by entering a niche, the seller automatically differentiates
himself from companies seeking the mass market. His focus is on delivering an exceptional
product and service.
c) It reduces marketing costs - if the seller knows his precise customer group, he can cut down
on small business marketing, advertising and promotional costs. He will run targeted ads
and campaigns specific to his customers’ needs instead of spending his resources on
broader promotional efforts. Niche marketing also allows him to create a better rapport
with his customers and build more personal relationships.
d) It demonstrates expertise - being an expert helps the seller stand out from the competition,
attract relevant customers and establish trust.
e) Catering to a niche can increase profit - creating a business in a niche market can lead to
higher rates for products or services. The supply and demand ratio, especially for those
pioneering a new industry sector, can be highly lucrative.
Product line extension
Line extension refers to the process of expanding an existing product line. This is when a company
with an established brand introduces additional items in a product category. The company uses the
value of the existing product to market and introduce new choices to consumers. The goal of line
extension is to satisfy a refined customer segment in the market. There are two types of product
line extensions:
a) Horizontal extensions - involve maintaining the same price and quality of a product but
changing factors like color, adding ingredients to differentiate the products.
b) Vertical extensions - involve increasing or decreasing the quality and price of a product to
create a lesser quality or luxury product.
Strategies for an extension can be:
a) New flavours
b) Different forms of product
c) New colors
d) Different ingredients
e) Different sizes
f) New types of packaging
Advantages of line extensions
Product line extension is a part of every company’s marketing strategy. It’s a low-risk way to meet
the needs of various customer segments and can be used as a competitive weapon to increase a
brand’s control over the market.
a) It improves brand perception in a low-risk way - line extensions are relatively low risk
compared to entering a new product category. The seller already has a successful brand, so
any related products he releases will likely be welcomed by customer segments. Shoppers
may already know his brand, but are waiting for the right products to come their way.
 b) It gives customers more options/ choices - the traditional view of choice is that it is a bad
thing and that having more choices can lead to decision fatigue. But that’s not always the
case, what is required is to find the balance. The consumers with limited options usually
end up more satisfied with their decisions versus those who have endless options.
c) It increases profits - line extensions are a quick and low-cost way to spike sales in the short
term. A company with an established production process and capacity to produce new
products means lower upfront investment. Companies often expand product lines to
increase demand for products and mitigate competitive threats.
Line extensions vs brand extensions
Brand line extension occurs when a company introduces a new item in a completely different
product category. It allows a company the opportunity to extend its brand with recognition from
its existing products.
Market segmentation
Market segmentation is the process of dividing up mass markets into groups with similar needs
and wants. The rationale for market segmentation is that in order to achieve competitive advantage
and superior performance, firms should;
a) Identify segments of industry demand,
b) Target specific segments of demand, and
c) Develop specific 'marketing mixes' for each targeted market segment.
In dividing or segmenting markets, researchers typically look for common characteristics such as
shared needs, common interests, similar lifestyles, or even similar demographic profiles. The
overall aim of segmentation is to identify high yield segments – that is, those segments that are
likely to be the most profitable or that have growth potential – so that these can be selected to
become target markets. Market segmentation assumes that different market segments require
different marketing programs - that is, different offers, prices, promotion, distribution, or some
combination of marketing variables.
A number of factors are likely to affect a company's segmentation strategy;
a) Company resources - when resources are restricted, a concentrated strategy may be more
effective.
b) Product variability - for highly uniform products (such as sugar or steel), undifferentiated
marketing may be more appropriate. For products that can be differentiated, (such as cars)
then either a differentiated or concentrated approach is indicated.
c) Product life cycle - for new products, one version may be used at the launch stage, but this
may be expanded to a more segmented approach over time. As more competitors enter the
market, it may be necessary to differentiate.
d) Market characteristics - when all buyers have similar tastes or are unwilling to pay a
premium for different quality, then undifferentiated marketing is indicated.
e) Competitive activity - when competitors apply differentiated or concentrated market
segmentation, using undifferentiated marketing may prove to be fatal.
Bases for segmenting consumer markets include;
a) Identifiability - refers to the extent to which sellers can identify or recognize distinct groups
within the marketplace
b) Substantiality - refers to the extent to which a segment or group of customers represents a
sufficient size to be profitable. This could mean sufficiently large in number of people or
in purchasing power
c) Accessibility - refers to the extent to which sellers can reach the targeted segments with
promotional or distribution efforts
d) Responsiveness - refers to the extent to which consumers in a defined segment will respond
to offers targeted at them
e) Actionable – segments are said to be actionable when they provide guidance for marketing
decisions
Forms of consumer market segmentation include;
a) Geographic – country, region, population density, climate, city size
b) Demographic – age, gender, occupation, socio-economic status, marital, family size,
income, education, home ownership, ethnicity, religion
c) Behavioural – purchasing trends, benefits sought, frequency of purchases, loyalty status,
user status (first timer, regular), and attitude towards product.
d) Cultural
e) Online customer segmentation – period spent online, pages and sites accessed, time spent
actively viewing a page, kinds of sites visited.
Data sources used for segmentation include;
a) Internal – customer transaction records, in-house surveys, customer feedback forms, patron
membership records (active, dormant members)
b) External – commissioned research, data mining, census data, observed purchasing
behaviour, government departments, government surveys, professional associations.