Niche Strategy - Meaning, Importance, Factors & Example

Published by MBA Skool Team, Last Updated: September 07, 2021

What is Niche Strategy?

Niche strategy is a unique marketing strategy which focuses on selling or promoting a unique and specialized product or service to a small but productive target group. It targets only those customers who can relate well to the particular product or service. The company tries to build the long term relationship with these small set of customers. Some people falsely believe that the profitability and success is directly dependent on the number of potential customers targeted.

Importance of Niche Strategy

This strategy is especially useful for the small companies with a limited budget and specialized products. But even large companies with mass products can make use of this strategy to target niche segments. Companies focus on the customers based on their demographics, interests, occupation or social causes. Niche products are mostly high involvement hence it is very important to have proper strategy in place to promote and grow the business.

Once the target group has been identified, a marketing strategy can be developed. Some of the strategies that can work well here are word of mouth campaigns, endorsement campaigns and targeted collateral campaigns. The companies can also target high margins by providing specialized services related to niche products.


Factors in Niche Strategy 

There are few things which need to be considered for implementing the niche strategy:

1. Unique Needs

The customers in the niche segment should have needs that are different from their general needs. These can be for a unique product or a variant of existing product in a category available generally as well. 

2. Market Size

The market size of the niche segment should be sufficient to support the business and ensure profitability. It should be feasible and viable to do sustainable business.

The market size would be small in niche strategy but it is assumed that it would pay more so the focus is on quality than quantity.

3. Competition

Although the business is targeting niche segments, but there would be competitors there too. The product should have some point of differentiation for the consumers. Also the competition should to a level where all can compete and still be viable in terms of business.

4. Communication

It is very important to identify the correct niche segment and communicate effectively with them. Niche customers can easily give their feedback through a lot of channels and it is easier to connect with them.


Example of Niche Strategy

Toyota, a large car manufacturer, often uses niche marketing strategies. Toyota launched Prius, which targeted environment friendly customers. It also targeted the media (environmental groups and their publications) that mainly targeted the people concerned about the environment.

Another example can be of automation products which are available in the market like robotic vacuum cleaners or house automation solutions etc. These are still niche but are growing well. 

Hence, this concludes the definition of Niche Strategy along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 5 categories.

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