Niche Markets

1. Niche Markets

2. 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 marketers are often reliant on the loyalty business model to maintain a profitable volume of sales.

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

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

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

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

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

8. A niche hope! E.g. • 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.

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