What is Niche Market?
A niche market is a subset of a market on which a particular product or service is focused. The market subset is usually based on five different market segments: geographic, demographic, firmographic, behavioral and psychographic.
Niche marketing involves dividing the traditional market into smaller groups having homogenous needs for a product, and selecting one such group which is different from the mainstream business.
Development of a niche market acts as an opportunity to sell tailored products and services to the specific group, which are overlooked by the other firms and then devising strategies to cater the audience belonging to that group or niche.
It begins with acknowledging the needs and preferences of the few customers and then making efforts to transform it into a larger market.
Examples of Niche Market
- There are many niches, within the larger laptop market. Gaming Laptops would be considered as a niche market, as it will offer laptops to professional gamers, animators and multimedia artists, programmers, audio professionals and many more.
- Within a larger soap market, there exists a niche market for hand-made soaps, which will target only those customers who want chemical-free soaps, which are less harsh on the skin.
- In a larger cooking oil market, there is a niche market for cold-pressed oil, which focuses on buyers who give more preference to quality or health.
Characteristics of Niche Market
A niche market is characterised by:
- Unique set of needs: Niche market is represented by specialist needs among the audience, served by a few competitors.
- Ample size: The size of the niche market should be large enough to earn profits.
- Sufficient purchasing ability: While selecting a particular niche, the firm must lay emphasis on the purchasing ability of the target customers.
- No real competitors: Markets that are not recognized by other firms or the competitors have negligible interest in it.
- Resources, competencies and skills: Firm possesses the needed resources, competencies and skills, to exploit the niche.
- Need for special treatment: Niches are typified by the customer group whose needs are often ignored by the existing players in the market.
- Growth prospects: The firm seeking to enter a niche market, should focus on the growth prospects, i.e. the opportunities to grow and expand.
- Customers Goodwill: In order to excel in a market niche, first of all the firm should understand clearly and thoroughly, ‘what their customers need’. Further, niche customers are so loyal, that they can pay a higher price to get the product.
- Firm achieve economies through specialization: The primary advantage of pursuing a niche strategy is that the firm seeks dominance in the market and achieve economies through specialization.
- Provides barriers to entry for competitors: Niche market should be such that which presents barriers to entry for competitors because it is not likely to attract competitors easily.
- Greater profit margins: A niche marketer knows the customer’s group and their needs so well that it serves them in the best manner. This leads to greater margins due to the premium price for the value addition, and strong brand loyalty. Further, the customers are ready to pay a premium price for the product which exactly satisfies their needs.
A niche market is an extremely concentrated market, with a specific group of audience and focusing on a specific product. That is why, the marketing strategies target the specifications and features of the product, which is capable of fulfilling distinctive market needs. By doing this the company aims at surviving competition and become a market leader.
It distinguishes the product offered by the firm with other products in the market and caters the customers who demand a unique or premium product.
What is the difference between target market and niche market?
Target Market: Your target market is your ideal client – the person or group of people you serve. In other words, the group of people you TARGET with your marketing.
Niche Market: Your niche on the other hand is your area of specialty. It’s your service focus or HOW you help your target market.
How to Find a Niche Market ?
- Reflect on your passions and interests.
- Identify customers’ problems and needs.
- Research the competition.
- Define your niche and its profitability.
- Test your product or service.