Niche Market

There is not much differentiation between brands when it comes to certain products, like dishwasher tablets, toilet paper, detergent, or bin bags. "Why?" you might ask. The companies that produce these products want to target ask many customers as possible and create a universal appeal. Therefore they create a product and standardize it to reach a large customer segment. But what happens when a company wants to target only a small subsegment of consumers? Let's find out.

Niche Market Niche Market

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Table of contents

    Mass vs. Niche Market

    Most markets are made up of one dominant market segment and a couple of smaller segments. The dominant segment is known as the mass market, whereas smaller segments are known as niche markets.

    Niche Market Definition

    Niche marketing involves outlining and understanding the needs and wants of customers in a small (niche) market segment. Niche segments are usually created by identifying needs and wants that are not addressed by the mass market or by other businesses.

    A niche market is a smaller segment of a larger market. In niche markets, customers tend to have very specific wants and needs.

    Niche segments tend to be small; the number of consumers and the quantity (volume) of products or services consumed tend to be lower than other market segments. The type of products or services niche market consumers demand is usually very specialized, distinct, or unique. Due to this specialization, the price of niche market products and services tends to be relatively high, or at least higher than mass-market products. Niche producers tend to sell their products online or through individual retailers.

    For example, a business-to-business (B2B) firm might offer professional data analytics software for market researchers. This company targets a niche market of marketing professionals as the product is very specific and the average consumer likely neither wants nor needs such software.

    Niche Markets Marketing Analytics StudySmarterFig. 1 - Marketing Analytics

    Mass Market

    Mass marketing is a strategy in which businesses decide to target an entire market with their product or service. It is a type of strategy in which a company sells to the most prominent part of the market.

    The mass market is a large part of the market. It includes a general and broad consumer segment.

    Mass marketing tends to ignore the differences between consumer segments. Instead, it sells to everyone. Products or services tend to be relatively standardized and hold universal appeal. The idea behind mass marketing is for everyone to be a user of the product. Mass marketing aims to reach as many consumers as possible.

    A mass market involves a lot of different product options for consumers. Customer needs in this type of market tend to be less specific. Products tend to be quite similar (they are not remarkably differentiated).

    Generic brands appear as a result of mass marketing.

    A generic brand is a product without a universally recognized brand name or logo.

    These types of products are usually not advertised. Sometimes generic brands are synonymous with a product, meaning consumers treat the brand name as if it were the product.

    Did you know Bubble Wrap, Hoover, and Jacuzzi are brand names? However, due to these brands' success and widespread use, their names have become synonymous with the products they offer.

    Check out our explanation of Brand Management and Brand Awareness to learn more about the importance of branding.

    Niche Marketing Strategy

    Mass and niche marketing strategies play a significant role in market targeting. Once customer segments have been identified, marketers must target their chosen segment with their targeting strategies. The two main targeting strategies are niche and mass marketing.

    Check out our explanation of Segmentation, Targeting, and Positioning to learn more about the STP Model.

    Using a mass marketing, or undifferentiated marketing strategy, the company focuses on what all consumers have in common rather than their differences. As a result, companies using this strategy create products and marketing campaigns that target and relate to all consumers in a market. However, it is hard to appeal to everyone in a market, so many companies use niche marketing strategies instead.

    On the other hand, marketers might use a niche marketing strategy to target a smaller group (or smaller groups) of consumers. Here, after segmenting the market, the marketer looks for specific differences in customer segments and decides to fulfill only one group's wants and needs.

    Keep in mind that niche marketing only works if the marketer can profitably fulfill these wants and needs.

    As a result, the marketer needs to define niche segments specifically so they can optimize the products and campaigns directed to the group. A niche marketing strategy also allows companies to optimize their resources, focusing on a small group. Large, established companies often ignore or underserve these groups, presenting an opportunity in the market for smaller firms.

    There are many different niche and mass-market brands you have probably heard of. The following section will outline an example of each.

    Niche Marketing Examples

    One example of a company targeting a niche market is Lefty's e-commerce store. They are an online business that targets left-handed people by selling specific products tailored to left-handed use. They have segmented their customers based on whether they are left-handed or not and have created a niche segment by identifying a gap in the market.

    Other businesses were not meeting the needs and wants of specific left-handed consumers. As a result, they have come up with unique and specialized products (like oven mitts, office supplies, and gardening tools) that are made specifically for left-handed consumers to address this gap in the market. The business has created a niche segment for its products.

    Mass Marketing Examples

    An example of a mass-market product would be washing up liquid. A popular brand of washing-up liquid is Fairy, which is manufactured and owned by consumer goods giant Procter & Gamble. Fairy's product range is relatively small. The washing-up liquid is most widely available in the original (green bottle) version and the lemon-scented (yellow bottle) version. You have most likely encountered Fairy washing-up liquid in your kitchen or your friend's kitchen, as it is by far the leading brand of washing-up liquid in the UK. This is because it is a mass-market product. The product is very standardized, and it has a universal appeal. It is bottled in simple packaging and is relatively cheap.

    Niche Markets Mass marketing strategy for dish soap StudySmarterFig. 2 - Mass Marketing Strategy for Dish Soap

    Fairy is marketed through a mass-market strategy. The advertising campaigns used by the brand tend to have universal appeal due to their simplicity. The ads are simple, straightforward, and generic. You will most likely achieve this generic characteristic when marketing to a mass market.

    Niche Market: Advantages and Disadvantages

    There are several benefits and downsides to both mass and niche marketing.

    Niche Market: Advantages of Niche Marketing

    • Less competition, as not many firms offer the specialized product or service.

    • Clear objectives and aims to reach the specific target segment.

    • Customers could be easier to find and reach.

    • The company gains market expertise due to the specialized skill set required to manufacture the product or operate the service.

    • Can often charge a higher price and benefit from higher profit margins.

    • More loyal customers as limited options exist.

    Niche Market: Advantages of Mass Marketing

    • Benefits of large-scale production (economies of scale).

    • The potential to minimize unit costs.

    • Large-scale capacity - do not have to face supply issues.

    • Large customer base and customer reach.

    • The universal appeal of generic products (no need to heavily differentiate).

    • Lower marketing costs.

    • Customers' wants and needs tend to be general.

    Disadvantages of Niche Marketing

    • No economies of scale (low-scale production).

    • Higher unit costs.

    • Could attract competition if the product or service is successful.

    • The company could become too reliant on the production of a single product. This could lead to long-term inefficiencies.

    • Sensitive to market changes.

    Niche Market: Disadvantages of Mass Marketing

    • The market is more competitive.

    • It can be hard to persuade consumers of the product's superiority due to the lack of differentiation.

    • High brand switching does not make much of a difference to customers which brand they purchase.

    • Marketers must keep up with competitors' prices and changes, as demand can be sensitive. For example, if a competitor lowers the price of their product, consumers will likely purchase the competitor's cheaper product as opposed to yours.

    • A lot of similar products are available to customers on the market.

    • Consumer segments could be too broad to target customers appropriately.

    Niche Market and Mass Markets - Key takeaways

    • A niche market is a smaller segment of a larger market. In niche markets, customers tend to have very specific wants and needs.
    • Niche marketing involves outlining and understanding the needs and wants of customers in the small (niche) market segment. Niche segments are usually created by identifying needs and wants that are not addressed by the mass market or by other businesses.
    • The mass market is a large part of the market. It includes a general and broad consumer segment.
    • Mass marketing is a strategy in which businesses decide to target an entire market with their product or service.
    • Mass market products or services tend to be standardized and have universal appeal.
    • There are several advantages and disadvantages to both niche and mass marketing.
    Frequently Asked Questions about Niche Market

    What is a niche market?

    A niche market is a smaller segment of a larger market. In niche markets, customers tend to have very specific wants and needs. 

    What is a niche market example?

    For example, a business-to-business (B2B) firm might offer professional data analytics software for market researchers. This company targets a niche market of marketing professionals as the product is very specific and the average consumer likely neither wants nor needs such software.

    What are the components of niche marketing?

    In niche marketing, after segmenting the market, the marketer looks for specific differences in customer segments and decides to fulfill only one group's wants and needs. As a result, the marketer needs to define niche segments specifically so they can optimize the products and campaigns directed to the group

    What is a niche market product?

    The type of products or services niche market consumers demand is usually very specialized, distinct, or unique. Due to this specialization, the price of niche market products and services tends to be relatively high, or at least higher than mass-market products.

    What is mass market?

    The mass market is a large part of the market. It includes a general and broad consumer segment. Mass marketing is a strategy in which businesses decide to target an entire market with their product or service. It is a type of strategy in which a company sells to the most prominent part of the market. 

    What are the advantages and disadvantages of mass marketing?

    The advantages of mass marketing include a large customer base and reach, economies of scale, lower unit costs, large-scale capacity, and the lack of need to differentiate, which could mean lower marketing costs. The disadvantages of mass marketing include higher competition, high brand switching, competitive pricing, and difficulty in targeting customers.

    Test your knowledge with multiple choice flashcards

    Mass segments are usually created by identifying needs and wants that are not addressed by the niche market or by other businesses. 

    In niche markets, customers tend to have very specific wants and needs. 

    Mass segments tend to be small; the number of consumers and the quantity (volume) of products or services consumed tend to be lower than other market segments.

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