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(originally published to Helium writing site, now gone)

Niche marketing is where a certain product or service is targeted to a particular subset of a larger market. The word “niche” comes from the French word “nicher”, meaning “to make a nest”. Traditionally, “niche” has been used to describe an ornamental recess in a wall, usually rounded or arched, for a statue or other decorative object. In ecology, the word is used to describe an organism’s position in a plant or animal community. In business and in general life, “niche” is often used in a situation where a person has found a suitable or appropriate position or place – we talk about someone finding their niche. A market niche is where a firm has found a particular part of the market that suits its size, expertise and objectives, and it concentrates on targeting that market.

Thus niche marketing is about finding a unique product or service to fulfill unmet needs of a certain group of people, for example, educated 20-29 year old women, or people in a particular location, or people with certain behavioral characteristics. An example of niche marketing is where a firm finds that the market for boarding kennels in an area is saturated and that a proportion of people would like something better for their pets, so the firm opens a pet motel. The firm can therefore offer a specific group of people a particular service that meets their needs. Many markets might not be adequately serviced through mainstream marketing.

A firm that isn’t large enough to compete against the leading companies in a market might search for a niche, or in other words a smaller part of that market, and they might do better in terms of sales and profit than they would otherwise have done. For such a firm, the advantages of specialization can outweigh those of economies of scale. Another benefit for niche marketers is that the main producers might ignore them, as the niche is often too small for them to worry about. Sometimes the product might not be much different from that produced by a mass producer, but the packaging or delivery might be different and the promotional strategy might differ.

A niche marketer might rely more on word of mouth as a promotion tool than mainstream marketers. Customer loyalty is often important for a successful niche marketer. This means they have to know their customers’ needs and wants better than a mainstream provider. A niche marketer will strive for a high level of customer service and customer satisfaction, and will be keen to keep its customers.

Niche marketing can be undertaken by large firms as well as small ones. Large companies can use niche marketing to target certain market segments. An example is Nike, whose sales and profit had plateaued, and they consequently developed various niches by segmenting the footwear market by each sport, and further segmenting within certain sports. Niche marketing is becoming increasingly popular for firms of all sizes as they compete in a marketplace saturated with goods and services of every description.

To be a successful niche marketer, a firm needs to pick the right segment to target. This can be based on potential sales levels, profitability of the segment, whether it’s suited to the firm’s distribution methods, likely competition in the segment, and potential substitute products. The firm should ensure that the target market has their unique needs and wants satisfied. It must identify those needs and wants and develop a particular product for these people and market it in a way that will reach them. In this regard, it is important for the firm to be on the same wavelength as the potential market.

In summary, a niche marketer must have a unique product that is marketable, must be in a market that isn’t saturated, and must promote it appropriately to the right customers.