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Mass Vs Niche Markets

Here’s a short explanation of the difference between niche and mass marketing.  For an example one of my favorite products the humble potato crisp as we know you can just about buy a pack of crisps in particular Walkers crisps anywhere; garages, supermarkets, news agents, you name it you’ll find Walkers crisps in just about every outlet and they’re a great example of a mass-market product.

Walkers has over 55% of the market for crisps in the UK. It’s owned by a very large multinational called Pepsi and whilst it’s got a wide product range of different flavors essentially you’re buying Walkers crisps. You know exactly what you’re getting. However, there are also quite a large number of smaller crisp operators who try to operate in a niche segment.

For example O’donnell’s here who have a range of gluten-free crisps- traditionally hand cooked as well and you won’t find them in anywhere near as many outlets. You’ll find them maybe in  one or two selected supermarkets. Some delicatessens possibly but nowhere near the same kind of distribution that the mass market leader Walkers has and that’s quite a nice illustration.

The mass market is the biggest part of the market where there are, there may be many similar products offered by a number of competitors. The market may be dominated as it is in crisps by one large producer or possibly dominated by two or three but the key thing here is the biggest part of the market and customer needs are less specific. Needs and wants are less specific compare that contrast that with a niche market.

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Of the overall market, a niche or a niche market segment is a smaller path; a smaller segment of a larger market and the reason why it’s smaller is that customers; there are fewer of them. But, they have more specific needs and wants.

In this case, with crisps gluten-free, so what can we say?  The implications of targeting trying to operate in a mass-market because it’s the biggest part of the markets and because you’re dealing with customers who have relatively fewer specific needs and once you can afford to make your products less specific and you can afford to go for high production outputs.

So, the key to success in mass markets is to have low unit costs and exploit economies of scale using unit costs and even better if you can align that also with having a brand and a name that is ubiquitous. The chances are that you create a very strong competitive position that you’re serving the biggest part of the market with a brand, a product that most consumers recognize and value and demand.

Mass-market brands that have captured a significant share of the largest part of the market from Gillette razors to Heinz beans and complex. So, to be successful with mass marketing, what you need well because it’s them the largest market; you clearly need to be able to target the widest possible customer base. If you can, the rewards are huge because your sales should be significant – in theory talk successfully targeting at mass market is lower risk. You’re pulling all your resources focused on to a large market that has the biggest possibility of making returns for you and if as we’ve said you can achieve those economies of scale and reduce your unit costs.

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You should be able to target a mass market profitably. Why would a business target a niche?

Well, mainly because in a niche market, the potential for higher profit margins and the potential for differentiation of your products and service is greater. This is because we’ve said that in a niche market segment, customers have more specific need to want. Therefore, they’re probably  looking for a more differentiated product.

If a business has specialist skills, specialist knowledge, is able to differentiate its products from the mass-market offerings that it may be able to charge a higher price and earn a higher profit margin albeit to customers who are smaller in number than in the mass-market but do well and you may benefit from more loyal customers.

Clearly the drawback of targeting your niche is that you’re not or you’re less likely to gain from economies of scale simply because the output you’ll be operating at isn’t sufficient to get unit cost down low. However, you might argue that by targeting a niche and succeeding in a niche you’re less likely to attract a competition though that’s just an overview of the concepts of niche and mass markets

Having read the above, also check out the below video for a quick sneak peek review of niche vs mass marketing.

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