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Niche Market

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Niche Market

When it comes to certain products, like dishwasher tablets or toilet paper, there is not much differentiation between various brands. This is because the companies that produce such products want to target as many customers as they can and create a universal appeal. Therefore they create a product and standardise 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.

Characteristics of niche market and mass 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

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.

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

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 business sells to the largest part of the market.

Mass marketing tends to ignore the differences between consumer segments. Instead, it sells to everyone. Products or services tend to be quite standardised 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 particularly differentiated).

Generic brands appear as a result of mass marketing.

A generic brand is a product without a universally recognised 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.

Bubble Wrap, or Hoover.

Examples of niche market and mass marketing

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 example

One example of a company targeting a niche market is the e-commerce store Lefty's. 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.

The needs and wants of certain left-handed consumers were not being met by other businesses. As a result, they have come up with unique and specialised 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 example

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 good giant Procter & Gamble. Fairy's product range is quite 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 standardised and it has universal appeal. It is bottled in simple packaging and is relatively cheap.

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. This generic characteristic is what you will most likely achieve when marketing to a mass market.

Advantages and disadvantages of niche market and mass marketing

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

Advantages of mass marketing

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

  • The potential to minimise 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).

  • Customers' wants and needs tend to be general.

Advantages of niche marketing

  • Less competition, as not many firms offer the specialised 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 specialised 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.

Disadvantages of mass marketing

  • The market is more competitive.

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

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

  • You need to 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 properly target customers.

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 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 quite standardised and hold universal appeal.
  • There are several advantages and disadvantages to both niche and mass marketing.
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