Advantages and Disadvantages of Niche Marketing

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Marketing products nowadays can be very difficult, considering the huge amounts of competition you face from other companies selling the same products. This is where niche marketing comes in. But what is niche marketing? What are the advantages and disadvantages of niche marketing? It can be used effectively but you first need to understand what it is.

What Is Niche Marketing?

In marketing, a “niche” refers to a specific subsection of the population. When you market to a niche, you are marketing to a specialized group of consumers that make up a portion of the market as opposed to marketing to the entire consumer market.

In order to perform niche marketing, you have to first identify the specific group of people that makes up your niche. This is done partly by using demographics. Demographics include race, gender, age, income level, education level, and location. The target group is not simply going to be a group of people in one demographic, such as women or teenagers. A niche market is more specific than that.

For example, your niche market might be teenage girls whose parents have a high-income level. You could also target parents with children under the age of three who live in a certain area. As you can see, these are much more specific than simply targeting a certain demographic.

Another aspect of niche marketing is the product or service itself. Whatever you are selling needs to be something other companies aren’t offering. It needs to be unique.

How Is Niche Marketing Used?

Niche marketing is used in order to better market a product or service to the people most likely to actually use it. If you make a night cream for women that is meant to reduce wrinkles, marketing the cream to all women would be too broad. If the night cream is a luxury cream, it would also not make sense to market to women in all income levels. You would want to market to women over a certain age (those who are likely to be developing wrinkles) above a specific income level.

The reason for using niche marketing is because it is thought that you are more likely to sell your products or services when you are marketing them to the people who are actually likely to buy them. To use the above example, if you were marketing to all women, you would be marketing to many women without wrinkles who would not want your night cream.

You might also be marketing to women who cannot afford your night cream. By marketing to people you have determined may actually be likely to buy your product, you are wasting less time marketing to people who aren’t going to buy it.

Advantages and Disadvantages of Niche Marketing: Shoes in a Shop Window
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Niche Marketing Rules

When using niche marketing you have to be strategic. As with any type of marketing, there are certain rules you have to follow and specific strategies that will maximize your effectiveness.

As mentioned, your product or service needs to be unique. This doesn’t mean you have to invent some wild contraption that nobody has heard of before. You can create something like shoes, an item made by many different companies, as long as the shoes are unique.

Maybe the designs on them are made by artists local to wherever your niche market lives. Maybe they have specialty insoles that aren’t found in other shoes. Whatever it is, your product needs to have something that people can’t necessarily find elsewhere.

One strategy is to speak like your customers. You don’t want to act like a business who is talking at people, you want to act like you’re part of the group. If you are targeting teenagers, use their lingo. Use branding that appeals to younger audiences even if it doesn’t necessarily appeal to the people on your team. Your slogan, the packaging of your product, the dialogue used in your ads, the colors and images used in banners, etc. all needs to fit in with the aesthetic of your consumers.

When using a niche market you also need to test your market before you begin selling your product. If you have any competitors, you need to assess them. See what they are doing. Are they successful? Are they failing to make sales? Learn from them so that you can market better than them.

Whether you have competition or not, you also need to perform assessments to be sure that your niche market is actually going to buy your product. This can be done in a variety of ways such as creating product prototypes and having groups of consumers use them and offer feedback.

Advantages and Disadvantages of Niche Marketing for Businesses

There are many reasons why companies use niche marketing. As explained above, one of the clear advantages is that you are marketing to your ideal consumer. You are targeting the people you have determined are the ones most likely to actually buy your product.

Another key advantage of niche marketing is that you often have less competition if you have any at all. Depending on how specific your niche market is, you aren’t going to be fighting to have your product seen. This is especially true if your product or service is one that is not being offered by other companies.

Consider the night cream example: there are many companies that sell night creams. However, if your company sells night cream that is made from certain ingredients, maybe organic, free trade, hypoallergenic, etc. ones that other companies are not using in their night creams, then you have an advantage in the market. A niche market who wants those specific products in your night cream is going to go to your company because other companies are not marketing to them.

Another advantage is that you often end up spending less on marketing because you aren’t wasting money marketing to huge groups of people. Instead of spending money across multiple platforms, you only need to market in areas where your niche market is going to see your ads.

If your niche market is made up of tech-savvy people who spend a lot of time on the internet, you don’t need to make TV or newspaper ads, just ones that they can find online. If your niche market is made up of people who watch a certain television show, buy ads that play during that show.

Along with spending less money comes higher profit margins. Not only are you spending less money on marketing, but you also may be able to charge more simply because consumers aren’t able to get your product anywhere else. Your customers might not realize it but they may be paying more just because you’re the only one offering the product they want.

Once you have established your niche market and they become aware of your product, you are also more likely to build brand loyalty. Because you might be the first one offering a certain product or service or the only one who is marketing to a certain niche market, even if other companies start offering the product or marketing to your consumers, you’ve already got their loyalty.

On the flip side of having no competition, there may be a reason why other companies are not making certain products or marketing to certain subsets of the population. The niche market that is likely to buy your product may be too small for you to make any profit off of them. You want to market to people who actually want a product or service that they just aren’t being offered not people who aren’t being marketed to because they don’t want something or aren’t going to buy it.

The niche market may also just be one that isn’t likely to spend money on certain things, even if the product is one that they like. For example, people who like handmade lotions are often likely to make the lotions themselves or have a friend make them. You might find that selling artisan lotions to certain niche markets just isn’t profitable because they aren’t going to buy something they can make for themselves.

Another disadvantage is that your niche market, by definition, is going to a smaller and more specific market. The niche market is not likely to grow enough for your business to grow and your product to see exponential increases in sales. Once you have your niche market and the people in it are buying your product, you may end up seeing sale increases drop off. Your customers might be loyal to you and they will continue to buy your product but you aren’t likely to continue to get more customers.

While it is true that there will be less competition when selling your product to your niche market if there is competition you may end up having to fight more for customers. If there are only a couple of companies selling the same product as yours, the company with more expertise or the one who has been selling the product longer is going to be more likely to win.

If you are getting into a niche market that has already been marketed to, it is going to be an uphill battle. Even if you were the first one to market your product to this market, if another company comes in that is able to sell the same quality of product for less, you may find your customers going to them instead.

Is Your Market “Too Niche”?

Niche markets are meant to be specific but you need to be careful about getting too specific. Being too niche is a thing and you need to avoid it! Be careful about narrowing down your market too much. Marketing to parents of teenagers in a certain geographic region might be beneficial but if you’re only marketing to those same people in a specific city that’s too specific.

Marketing to people with very high-income levels can also create a market that is too niche as there are statistically less of these people and narrowing the market down by including more demographics in addition to that might create a niche market that is too small.

Even if your niche market seems broad enough to have a good amount of consumers, you should test it out before marketing your product. You may think that your niche market is a good size only to find out that, while your product seems like it should be great for the niche market, very few people in the target group actually want to buy your product.

Niche Marketing for the Consumer

Everything discussed above is from the point of view of the business. But as mentioned, in order to effectively use niche marketing, you need to understand your consumer. Think of things from their point of view.

An advantage of niche marketing for consumers is that they may be offered a product they’ve never been offered before. This can be a great thing! It is always great to finally be able to buy something you’ve been wanting but unable to find.

Hair dye is often made for people with certain textures of hair, for example, and people with different hair are unable to find hair dye that will work for them. When companies make hair dye that caters specifically to them, it is a relief for those people to finally be able to buy hair dye that works for their hair.

A disadvantage for consumers is that they may end up paying more for the products because nobody else is offering them. Consumers are willing to pay more to a certain extent, especially if your company is a small business or local business or if the product is handmade.

However, you need to be careful with how much you charge. If your prices are too high, another company could easily step in with cheaper products and take your customer base. Your customer base may also not be able to afford your product if you don’t price it carefully.

See If Niche Marketing Is Right for You

Niche marketing can be a great tool for any business if utilized correctly. Once you understand the advantages and disadvantages of niche marketing, you can better use niche marketing for your products. It can take some time to figure out how to best use niche marketing but once you do, it can be an excellent tool for your business.

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