Niche Markets

What is a niche market? Niche marketing is the process of finding and serving profitable market segments and designing custom-made products or services for them. Niche marketing is the process of finding and serving profitable market segments and designing custom-made products or services for them. Niche marketers are often reliant on the loyalty business model to maintain a profitable volume of sales. Niche marketers are often reliant on the loyalty business model to maintain a profitable volume of sales.

Characteristics of a NICHE Low volume of sales Low volume of sales High unit costs High unit costs Therefore high prices Therefore high prices (Highly) Differentiated products (Highly) Differentiated products Targeted promotion Targeted promotion

An ideal niche is… Large enough to be profitable Large enough to be profitable Sufficiently differentiated Sufficiently differentiated Small enough to avoid the attention of the big boys. Small enough to avoid the attention of the big boys. We have the competence to take advantage of the opportunities offered. We have the competence to take advantage of the opportunities offered. Can build up goodwill, to keep customers Can build up goodwill, to keep customers

Advantages Less direct competition Less direct competition Clear focus Clear focus Builds up specialist skills/knowledge Builds up specialist skills/knowledge Cheaper to set up Cheaper to set up Able to charge premium prices Able to charge premium prices Build up strong brand image/loyalty Build up strong brand image/loyalty

Disadvantages Lack of Economies of Scale Lack of Economies of Scale Dependent on a small market Dependent on a small market If successful, will attract competition If successful, will attract competition Small numbers make vulnerable to changes in consumer spending (as does premium pricing) Small numbers make vulnerable to changes in consumer spending (as does premium pricing)

How to compete with UK supermarkets? 4 companies account for 74% of grocery shopping in the UK 4 companies account for 74% of grocery shopping in the UK Tesco alone has 30% Tesco alone has 30% They are now moving into convenience stores They are now moving into convenience stores What hope is there for small independent shops? What hope is there for small independent shops?

A niche hope! E.g. Bakers can survive by offering high quality fresh bread, and specialty pastries. Bakers can survive by offering high quality fresh bread, and specialty pastries. Butchers by latching onto the popularity of organic meat, and home made sausage. Butchers by latching onto the popularity of organic meat, and home made sausage.

On-line The inter-web can bring hope too. The inter-web can bring hope too. It will make more and more niches profitable! It will make more and more niches profitable! E.g. focuses upon saxophones, and only saxophones. E.g. focuses upon saxophones, and only saxophones.