Market niche strategy

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Market niche strategy is defined as a narrow group of customers who are looking for specific products or benefits. They have clearly defined needs and are ready to pay a higher price for a specific product (service) or its quality to satisfy them.

Niche market strategy consists in choosing the narrow scope of the market, where the buyers needs and preferences differ from the rest of the market. This allows to find such market subsegment, where the company can gain an advantage over competitors. Therefore, the company is focused either on the geographic market or on a specific group of buyers (usually not too large) and at the same time at the narrowly specified product range. This allows to identify the specific characteristics of products most sought after and desired by potential customers.

Strategy objectives

The aim of this strategy is to achieve the objectives pursued by the company by offering customers cheaper products or products with a high diversity of features. It is a strategy oriented towards customer needs, companies applying it must be prepared to meet a range of needs and expectations reported by customers.

Niche market strategy can be realized in two forms:

  • as a low cost leadership strategy - where the customers are mainly interested in price, the company focuses on gaining an advantage in terms of cost of manufacturing products in the particular market sub-segment,
  • as the strategy of diversification of products – used when the customer pay a particular attention to the performance and features of product.

Effects of application

This strategy is relatively safe. Company has the ability to gain competitive advantage, thanks to good market knowledge that results from a high specialization in terms of product range and ability to meet specific customer requirements.

Thanks to this it is possible to grow business and achieve a higher level of sales, however, there are limitations linked to the small overall market share. Also precise knowledge of the customers is correlated with specialization in the production, distribution and promotion, which allows for cost savings and higher profitability.

There is also some risk - competitors may take advantage of the experience gained in similar niches and overcome barriers to entry due to the high attractiveness of the niche. The risks stem also from the reduction of the differences in the products and services offered. Distinguishing features of the product can become widely offered, which implies the need for a rapid response and intervention with new attractive niche features.