Niche Markets and Mass Markets
- GCSE, AS
- AQA, Edexcel, OCR, IB
Last updated 22 Mar 2021
In most markets there is one dominant (mass) segment and several smaller (niche) segments.
For example, in the confectionery market, a dominant segment would be the plain chocolate bar. Over 90% of the sales in this segment are made by three dominant producers – Cadbury's, Nestle and Mars. However, there are many small, specialist niche segments (e.g. luxury, organic or fair-trade chocolate).
Niche marketing can be defined as:
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Targeting a product or service at a niche segment has several advantages for a business (particularly a small business):
- Less competition – the firm is a "big fish in a small pond"
- Clear focus - target particular customers (often easier to find and reach too)
- Builds up specialist skill and knowledge = market expertise
- Can often charge a higher price – customers are prepared to pay for expertise
- Profit margins often higher
- Customers tend to be more loyal
The main disadvantages of marketing to a niche include:
- Lack of "economies of scale" (these are lower unit costs that arise from operating at high production volumes)
- Risk of over dependence on a single product or market
- Likely to attract competition if successful
- Vulnerable to market changes – all "eggs in one basket"
By contrast, mass marketing can be defined as:
Where a business sells into the largest part of the market, where there are many similar products on offer
The key features of a mass market are as follows:
- Customers form the majority in the market
- Customer needs and wants are more "general" & less "specific"
- Associated with higher production output and capacity (economies of scale)
- Success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands