Niche marketing is a targeted marketing strategy aimed at small, specific and well-defined portions of the population. Organizations adopting this strategy, also known as concentrated or focused marketing, identify a specific market segment and tailor a marketing plan to that segment’s habits and preferences.
Niche marketing can be used to reach consumers who can be targeted based on various characteristics, such as demographics, hobbies, occupations, or interest in social or political causes. Each niche market defines specific product features -- including design, price, production quality and the demographics that the organization intends to address. Goods and services that are under the niche-marketing umbrella include products for addressing physical conditions (such as dermatitis, dandruff or acne), fitness products to tone specific parts of the body, clothing for specific body types and wedding planning for budget-conscious customers.
Niche marketing is more common for small businesses with limited budgets and offerings that are geared toward a specific group. However, larger organizations that typically have broader offerings might focus parts of their product lineups on niche customers. For example, automakers might target hybrid cars at environmentally-conscious buyers in urban areas.
With niche marketing, a company can effectively become a proverbial big fish in a small pond. These organizations can create niches that do not already exist by finding and fulfilling customer needs that others fail to address properly.
Potential benefits of a successful niche marketing strategy include strong demand for a product or service, limited competition and strong profitability prospects. However, niche markets can become crowded and competitive very quickly. Another potential challenge is the ability to benefit from economies of scale since niche marketing strategies, by definition, focus on a specific segment and tailor campaigns to that audience.
Some experts consider niche marketing both a marketing and business strategy and note that it is not for the faint of heart. Organizations aiming to identify and tap the right niche must research and test their offerings thoroughly to ensure that they exactly meet customer needs within the target segment.