Niche Marketing-Market segmentation
Sunday, June 28th, 2009 at
3:59 pm
Why do many analysts regard a niche marketing approach as dangerous?
Tagged with: niche marketing
Filed under: Discuss Dominating Niches
Like this post? Subscribe to my RSS feed and get loads more!
I'm not aware of anyone who considers niche marketing to be dangerous.
"Niche marketing" usually refers to focusing some marketing efforts on a narrow field, rather than broad-based audiences.
I'm not sure what "market segmentation" refers to in your question; it probably just means the notion of slicing a large market into smaller niches.
For example, if I sell lawn mowers, I might focus 10% of my marketing budget to target landscaping contractors, who buy multiple lawn mowers each year (perhaps I'd buy ads in industry publications, or do a direct mailing; and another 10% of my marketing budget to reach managers of apartment properties that have landscaping staff; I might budget 20% of the marketing budget to reach resellers (dealers, stores) that sell lawn mowers; and I might allocate the other 60% of my marketing budget to reach consumers.
If I sell herbs and spices, I might choose to allocate some of my marketing budget to consumers who seek specific health benefits from herbs and spices, as compared to consumers who simply seek flavor.
If I sell two-line cordless phones, I might target small businesses and perhaps even a specific industry (dentists or pawn brokers) that my research indicates are likely buyers of two-line cordless phones.
Every product sold serves multiple "niche markets," and every market can be divided into segments.
If there is any danger, it would be in focusing too much on a single niche or segment, and missing opportunities in other niches or segments. A great example is "destination travel" or "tourism," where marketers seek to attract tourists to visit a specific location (Orlando, Chicago, San Francisco, Paris). Apparently, gay couples spend more on such trips than most other "market segments," and therefore it can be profitable to allocate marketing dollars to target that audience. However, if the marketer chooses to exclude that niche (for whatever reason), there is a danger that other marketers will capture that niche, and earn more profits. Likewise, if 90% of the budget is spent on "gay tourism" then there is a risk not only of not "reaching" other potential visitors, but even of creating an impression that the destination is a "gay" or even "gay-only" destination, which might deter straight people from visiting.
Ok. Why so many analyst? because they don't have anything better to do. Why is it dangerous? Because you are puttin your eggs in one basket. What is here today could be gone tomorrow
Ok, so dominating a niche might not last you forever, but it really is the only way to succeed unless you have cheap distribution channels.
I look at it this way, if I open a business in a town and sell electronics, the chances of me having cheaper prices than Wal-Mart or Best Buy are pretty much slim to none, because I cannot afford to take as little margin as they do for each sale. They are able to do too much volume. If I specialize in sales of a certain type of product that Best Buy or Wal-Mart do not carry, I'm more likely to be able to charge what I need to in order to turn a profit.
These concepts are the same on the internet. It is too hard to compete with larger sites on the mass market products, but it is much easier to get a significant audience for a niche product because your audience is exponentially bigger than it was before the internet.
If you enter a niche that is not popular or that you know nothing about, you will probably fail. That is why it is dangerous. It is higher risk, but with a better chance of success.
Regards,
Michelle Greer
http://www.volusion.com
http://onlinebusiness.volusion.com
a niche is a very targeted specific group of people you want to advertise too and that is dangerous because you won't grow and get new customers. It is like people who see everything in green and your not going to convince them
that red is another color
Niche marketing is offering your product to a particular segment. So you need to go for innovation, as you are targeting a particular segment and designing your product to suit its (segment's) need.
Marketerer go for niche marketing following 80-20 rule (20% of customers give 80% business and 80% of customers give 20% busines). They design specific product for that 20% customer.
Now, suppose the offered product is rejected by the segment, then all your cost involved (R& D cost, product launching cost, time cost, …) will be a huge loss. This is why people are afread of niche marketing.
But I would like to suggest to take risk, otherwise your organisation will grow with a very slow rate or will not grow at all.