Do you know what luxury fashion houses like Gucci, Dior, Channel, etc., and the organic food market have in common? They both adopt a concentrated marketing strategy. In simple terms, concentrated marketing means selling to a particular market segment. This segment can be divided based on customers' age, gender, location, and income levels. Read on to learn more about concentrated marketing, its characteristics and advantages. And, of course, we will not leave you without real-world examples of companies implementing concentrated marketing strategies.
Concentrated Marketing Definition
Concentrated marketing, also known as niche marketing, is a strategy where a company focuses on serving a specific customer group. This approach involves concentrating all marketing efforts and resources on a single market segment to maximize the company's marketing effectiveness and gain a competitive advantage.
Concentrated marketing is a marketing strategy in which a company targets a specific and well-defined market segment with a tailored marketing mix that meets that group of customers' unique needs and preferences.
A company specialising in gluten-free snacks could use a concentrated marketing strategy to target individuals with gluten intolerance or celiac disease. By focusing exclusively on this niche market, the company can develop and market products specifically designed to meet the needs of this customer segment. This approach allows the company to differentiate itself from competitors, build brand loyalty, and increase profitability.
One thing to note is that a niche does not exist but is created by marketing efforts; the marketer has to identify a problem (opportunity) in the market and offer a solution.
In other words, concentrated marketing means identifying and serving a smaller, unique segment in the market. A niche company looks for an issue that other companies overlook and puts forward a viable solution.
One benefit of adopting concentrated marketing is that it requires fewer resources since competition is low. As a result, companies can save a lot of time and effort while focusing on creating added value.
Here are some ways to narrow a market:
Price
Demographic
Quality
Psychographics
Location
Concentrated Marketing Strategy Characteristics
Concentrated marketing strategy is a strategy where companies focus on one specific market segment and tailor their marketing mix to meet that group of customers' unique needs. In this list, we'll explore the main characteristics and features of concentrated marketing, including its focus on problem-solving, adoption by smaller firms, and emphasis on building strong customer relationships:
Serving one single market - Concentrated marketing focuses marketing efforts on one specific market. It finds a problem other companies overlook and provides a solution to it, thereby creating a new market.
Adopted by smaller firms - Companies that adopt concentrated marketing tend to be small or at the beginning of their journey. By narrowing down the customer base, they can save marketing time and effort while building strong customer relationships.
Focusing on problem-solving - Unlike undifferentiated marketing (mass marketing), where firms have to compete in nitty-gritty details to capture a larger market share, concentrated marketing focuses on communicating the core value of the business - "what problem does it solve?", "how would their life be different if they used the service?"
Concentrated Marketing Examples
Here are three examples of companies using concentrated marketing:
- Warby Parker - An eyewear company that offers affordable, stylish glasses and sunglasses. Their marketing campaigns are targeted towards millennials who value both fashion and affordability. By focusing on this specific group of customers, they have disrupted the eyewear industry and gained a loyal following.3
- Dollar Shave Club - A subscription-based razor blade delivery service for men. Their marketing campaigns and products specifically target men tired of spending a fortune on razors. By catering to this specific group of customers, they have been able to build a loyal customer base and compete against larger brands like Gillette.4
- Peloton - A fitness technology company offering high-end exercise equipment, including bikes and treadmills, and live and on-demand fitness classes. Their marketing campaigns are targeted towards affluent consumers who are looking for an interactive and convenient workout experience. By focusing on this niche market, Peloton has become a disruptor in the fitness industry and has seen tremendous growth in recent years.5
If these examples are not enough, below are more detailed analyses of concentrated marketing strategies in sports tourism and remote workers markets.
Concentrated marketing example: Sports tourism
Sports tourism is a niche market in the travel industry. It involves people traveling from one destination to another to participate in or witness a sporting event. The target customers of this market include professional athletes/officials attending tournaments and sports fans worldwide.1
Fig. 1 - Sports fans at a basketball arena
People travel for many reasons: to create, explore a culture, visit a famous landmark, or simply have a good time with their family and friends. The tourism industry thrives by recognizing these diverse needs among travelers and tailoring tourism products/services to meet these needs.
As you might be aware, the location of a sports tournament tends to alternate between countries around the world. For example, FIFA World Cup is held every four years in a new country. This change prevents favoritism and allows all economies to boost their tourism and national income. Income streams are from multiple sources, such as ticket sales, tourist accommodation, and sightseeing.
Within sports tourism, there are even smaller markets:
Professional players, coaches, and officials who participate in a tournament,
Sports fans who fly from their home country to watch a sports league (e.g., World Cup, Olympics),
Amateur athletes and hobbyists who want to participate in local sporting activities such as mountain biking, skiing, kayaking, etc.
Each of these niches would have different tourism needs. For example, sports fans would look for a place to stay and some activities to occupy themselves when not watching sports, whereas active sports participants would need extra services like gear, trainers, guides, etc.
Concentrated marketing example: Remote workers
More and more companies are going digital, whether through a hybrid mode (office and remote) or as a fully remote option. Remote working offers convenience and freedom but also comes with many challenges, such as lower motivation, lack of equipment, communication, etc.
These challenges are great opportunities for businesses to practice concentrated marketing. For example, companies can work in a niche that helps people:
Fig. 2 - Remote worker using apps to communicate with coworkers
An example of a product in the remote work market is Stretchly - a break time reminder app. The app blocks your screen and provides prompts such as resting your eyes, taking a walk, etc., while you're taking a rest. Stretchly is a niche product that helps people improve their mental well-being while working from home.2
Advantages of Concentrated Marketing
Concentrated marketing goes for the smallest market possible with the most revenue-generating opportunities. This approach comes with several advantages:
Reduces costs
Concentrated marketing can help reduce costs associated with marketing efforts. By targeting a specific market, companies can develop a marketing campaign tailored to that group of people, which can be more cost-effective than a mass marketing campaign.
Let's say there's a small company that sells handmade soap products. Instead of trying to market their products to a broad audience, they use concentrated marketing to focus on a specific group of people: those who are interested in natural and organic skincare products. By targeting this specific market, the company can develop a marketing campaign that speaks directly to this audience, with messaging that emphasizes the natural ingredients, the sustainability of the product, and the environmental impact.
Reduces competition
Niche marketing allows the company to focus on niche markets with fewer competitors and potentially capture a larger market share.
For example, a small vegan restaurant may target customers who follow a plant-based diet and provide them with menu items that cater to their dietary preferences. This allows the restaurant to differentiate itself from larger, more general restaurants that offer a broader range of menu items and attract a more diverse customer base. By catering to a specific niche market, the vegan restaurant can potentially capture a larger market share of the local vegan population and become a go-to spot for plant-based eaters.
First-mover advantage
Companies can use niche marketing strategies to position themselves as experts and leaders in their particular fields.
For instance, a startup that creates a new type of smartwatch with unique features that no other company currently offers could use concentrated marketing to target early adopters of their technology. By establishing itself as the first company to offer this type of smartwatch, the startup can become known as the leader in this particular market, building brand recognition and gaining an edge over competitors.
Builds stronger brand loyalty
Concentrated marketing strategy tailors products and services to customers' specific needs, leading to stronger customer relationships and increased brand loyalty.
A good example is a company that specializes in producing organic skincare products. By targeting environmentally-conscious consumers concerned about the ingredients in their skincare products, the company can tailor its products to meet its customers' specific needs and preferences. This results in higher customer satisfaction and brand loyalty, as customers feel that the company is providing them with the exact products they need and want.
Allows higher profit margins
A concentrated marketing strategy allows for higher profit margins, as companies can set prices without competing with larger, more established brands in the same market. Additionally, if the company's product or service is exclusive, customers will be willing to spend extra on them.
An example of this is a small bakery specialising in gluten-free baked goods. Since there may not be many other bakeries in the area that cater to gluten-free customers, the bakery can charge a premium price for its products, knowing that customers who require gluten-free options may be willing to pay more for the convenience of having a dedicated gluten-free bakery nearby.
Disadvantages of Concentrated Marketing
Concentrated marketing allows smaller companies to avoid competition and maximize their profit potential. However, it also has some disadvantages:
Difficulty finding small niches
Finding a small, untapped market can be challenging, and locating them can take a lot of time and resources. With concentrated marketing, companies must identify a unique problem that has not been solved by other companies, and that requires specific knowledge of the market.
Unprofitable small markets
When the market is too small, it may not generate enough revenue to cover the costs of production, marketing, and sales. Therefore, a company that adopts a concentrated marketing strategy must have strong sales skills and the ability to generate high profits with fewer customers.
Wrong targeting
In concentrated marketing, it's essential to target the right customers accurately. If a company focuses on the wrong market, it can result in poor sales performance and lower conversion rates. Thus, companies using concentrated marketing must conduct thorough research and analysis to ensure they're targeting the right audience.
Difficulty communicating with small groups
When targeting a small market, it can be difficult to communicate with them effectively. Due to the limited size of the market, there may not be enough information available about the customer's preferences and buying habits. Therefore, companies using concentrated marketing must find creative ways to connect with the customer base.
Limited growth potential
Due to the market's small size, the growth potential can be limited. As a result, companies must have a well-developed plan for expansion or diversification to continue to grow their business.
What is the Difference Between Differentiated and Concentrated Marketing?
The main difference between differentiated and concentrated marketing is that concentrated marketing targets one specific market with a specialized product/service, while differentiated marketing targets multiple markets with different products/services.
Differentiated marketing focuses on two or more segments of the market. Its purpose is to diversify the customer portfolio and maximize potential sales. Companies that adopt differentiated marketing strategies often have various product lines.
Check out our explanation of Differentiated Marketing to learn more.
An example is Coca-Cola. The soft drink giant has a diverse product mix of multiple brands, product types, and variants. While Coca-Cola primarily uses mass marketing, it also adopts a differentiated marketing strategy to reach different customer segments more efficiently. For example, the original Coca-Cola is promoted to younger people, whereas lower-sugar Diet Coke and Coke Zero are marketed to older groups.
The motto of differentiated marketing is "there's always something for everyone."
Concentrated marketing, on the other hand, only focuses on one market segment. The goal is not to diversify the customer portfolio but to niche down and build loyalty within one particular customer group. Concentrated marketing seeks to develop strong connections with customers.
Companies adopting concentrated marketing tend to be smaller or at the beginning of their journey. The lack of resources is their biggest motivation to go specific since smaller markets mean less competition and a lower marketing budget. When companies get bigger, it's harder to niche down as they need to be generalists.
One thing that concentrated and differentiated marketing have in common is personalized marketing campaigns. Marketing ads and content must resonate with the chosen segment the company targets.
Micro Marketing vs Concentrated Marketing
The difference between micro-marketing and concentrated marketing lies in the size of the targeted market segment. Concentrated marketing, known as niche marketing, focuses on a smaller market segment while micro-marketing targets individual customers.
Niche marketing concentrates on a market segment that is often overlooked by larger companies and tailors its products and services to meet the needs of that segment. This strategy is typically used by smaller companies with limited resources who can efficiently focus on one market segment.
On the other hand, micro-marketing utilizes technology to target individual customers and create personalized experiences for them. With artificial intelligence and automation advancements, even larger companies can implement micro-marketing strategies to tailor their products and services to individual customers' needs and preferences. For instance, Amazon's recommendation engine uses customer data to personalize product recommendations, making the shopping experience more relevant and engaging for each customer.
We hope that this explanation has helped you gain a better understanding of concentrated marketing. Before you go, why not take our quiz to test your knowledge on this topic?
Concentrated Marketing - Key takeaways
- Concentrated marketing is a marketing strategy that focuses all marketing efforts on one specific customer segment.
- Three main features of concentrated marketing are: they serve one specific market, are adopted by smaller firms, and focus on problem-solving.
- The significant advantages of concentrated marketing include reducing costs and competition, building stronger brand royalty, higher profit margins and first mover advantage.
- The main challenges to concentrated marketing are difficulty in identifying small niches and wrong targeting, low economies of scale, and limited growth potential.
- The difference between differentiated and concentrated marketing is that the former targets two or more market segments to diversify the customer base, whereas the latter targets only one market segment.
References
- Aniket Kadam & Roshan Deskmukh, Allied Market Research, 2021, https://www.alliedmarketresearch.com/sports-tourism-market-A13076
- Jan Hovancik, Stretchly - The break time reminder, https://hovancik.net/stretchly/
- Adam H-L, Warby Parker: Affordable Fashion That’s Easy to See, 2015, https://d3.harvard.edu/platform-rctom/submission/warby-parker-affordable-fashion-thats-easy-to-see/
- Graham Robertson, Dollar Shave case study: The underdog success that no one saw coming, https://beloved-brands.com/dollar-shave/
- Simon Kingsworth, 5 Important Lessons Marketers Can Learn from Peloton Branding, 2021, https://simonkingsnorth.com/5-important-lessons-marketers-can-learn-from-peloton-branding/
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