What Is a Niche Business?

A niche market is a market space occupied by a small group of customers with similar interests or needs in a larger market segment. Most successful startups don't start out in large markets, but instead grow their businesses by identifying emerging or undiscovered niche markets in larger markets. ^[1]

Niche Market

A niche market is a market space occupied by a small group of customers with similar interests or needs in a larger market segment. Most successful startups don't start out in large markets, but instead grow their businesses by identifying emerging or undiscovered niche markets in larger markets. ^[1]

Niche strategy refers to companies that are attacked in order to avoid direct conflicts with powerful competitors in the market, and select small markets that have been ignored by large companies, have unmet needs, are weak, and have a profitable basis.

Reasons for niche markets

In the Chinese market, on the one hand, resources are limited. In the face of market globalization, Chinese enterprises are much worse than multinational companies in terms of human, material, financial, technical, production, sales, branding, management and other marketing resources. Most of them Enterprises have just entered the year of weak crowns, and they do not yet have enough resources and sufficient competitiveness. On the other hand, in the international market, the cruel competitive environment has forced companies to focus on resources in order to survive. Positive competition, but it can concentrate resources in multinational companies that have no time to take care of or some small and diverse consumer groups market, in order to respond to the offensive of competitors, and can even become a magic weapon for Chinese companies to dominate.

Niche strategy is a magic weapon for companies to change from small to large. Many small and medium-sized enterprises in China usually understand the niche just to find market gaps and opportunities to make money. The Chinese-style thinking of niche is actually to equate the niche strategy with the growth strategy of SMEs. Careful study of those large multinational companies has almost such a niche history behind them-market latecomers have used the niche strategy to create new advantages, and eventually occupied a strong market position and changed the historical pattern. When Dell first entered the personal computer business, International Business Machines and Compaq were dominating the personal computer market. At that time, all products must be compatible with IBM computers. Twenty years later, IBM had terminated its personal computer production. Compaq also Had to merge with HP to survive. But Dell has dominated the personal computer market with a unique direct sales model. There are numerous similar cases. Therefore, as the market environment becomes more mature and stable, it is entirely possible for China's small and medium-sized enterprises to use niche strategies to defeat large domestic enterprises and even multinational enterprises and take over the world instead.

Large companies need to choose a niche if they want to capture new business opportunities, get richer profits, and meet the needs of successful expansion. Some large multinational corporations have made successful demonstrations for us in this regard. In 2004, Procter & Gamble launched the first series of daily necessities aimed at 9 to 16-year-old boys. This was a blank market that had not been noticed before. McDonald's and its franchisees in the U.S. have opened 12 McDonald's gourmet restaurants that target "the young white-collar workers who usually favor fast food and have higher incomes." White collar. Large enterprises in China can also make full use of their comparative advantages to find or create niche markets, use persistent niche attitudes and continuously innovate niche methods, and use composite niche strategies to achieve long-term foundation.

How niche markets are implemented

The key factor of the market niche is specialization. Through specialization to reflect centralization, the specialization positions available to market niche players are:

(1) Specialization of end users. Companies can specialize in serving a certain type of end user. For example, Peking University Founder successfully entered the Japanese market by cutting into Japanese news media customers.

(2) Vertical specialization. Companies can specialize in serving certain vertical levels in the production and distribution cycle. For example, Xinjiang Delong invested in the integration and integration of the power tool industry chain, leading domestic production at a low cost, and then acquiring US power tool distribution channels to achieve global market goals.

(3) Specialization of small customers. Many large companies follow the 80:20 rule, focusing 80% of their energy to meet 20% of heavy customers, turning a blind eye to small customers with low profit contributions. We can do the opposite and concentrate 100% of our energy to meet those The company's small customer base. For example, Haier, the first small-capacity refrigerator to enter the US market, just met the needs of American college students.

(4) Specialization of special customers. A company can sell its products exclusively to one or several major customers. For example, Hunan Foreign Trade Jiali Co., Ltd. integrated domestic citric acid production bases and focused on the supply of citric acid raw materials by Procter & Gamble's US headquarters in accordance with high standards of quality requirements.

(5) Specialization of products or product lines. The company operates only one product or product line. For example, the experimental equipment company distributes 27 different kinds of home-made desserts in Japan-all produced in small batches, and created according to the combination of Amish recipes and local flavor characteristics.

(6) Processing specialization. These companies produce special products for ordering customers only.

(7) Professionalization of services. The company provides the public with one or more services not available to other companies. For example, a bank can take a unique approach, accepting customers to apply for a loan by telephone, and handing cash to customers.

(8) Specialization of sales channels. These companies serve only one type of sales channel. For example, a soft drink company decided to provide only one large-capacity soft drink to gas stations.

Creating niche opportunities

(1) Capturing consumers' troubles. The key to marketing is to correctly determine the needs and desires of the target customers, and to deliver the products or services expected by the target customers more effectively and more favorably than competitors. These products or services are to meet the needs of consumers or solve their problems. tool. Consumer troubles are business opportunities for businesses.

(2) Targeting the weaknesses of competitors. Toyota hired a U.S.-based survey company to conduct a detailed survey of Volkswagen users, fully grasping the pros and cons of its rivals. In addition to models that meet consumer needs, its efficient and high-quality service network has eliminated Americans difficulty in maintaining foreign cars Concerns; poor heating equipment, small rear seats, and poor interior decoration are complaints from many users about Volkswagen. The disadvantage of the opponent is his own opportunity, and the disadvantage of the opponent is his goal. Based on market research, Toyota accurately outlined a target market divided by demographics and psychological factors, and designed American-style Japanese cars that meet the needs of American customers. The Corolla has finally knocked on the door of the American market with its small, affordable, comfortable, stable and convenient maintenance advantages.

Expanding Niche Shares

Once you have successfully cut into a niche market, that is to say, you have found a market foothold, "it is better to chase the poor to the poor," and you must start working to expand market share. Let consumers become your loyal customers, continue to consume your products, or old customers bring new customers, and companies may make more profits on the same customers. Electrolux China President Liu Xiaoming was ordered to be in distress. In market research, it was found that Electrolux's failure in the past few years was that the refrigerator it developed did not meet the consumption habits of Chinese people, so it catered to China as much as possible in terms of appearance and function. For people's tastes, I found a special Chinese situation in the use of refrigerators: the Chinese put the refrigerator in the living room or even the bedroom. So he mobilized all Electrolux research and development forces, and in 1998, launched a series of "new quiet world" refrigerators. Because it meets the consumer demand for quietness, the "new quiet world" hits the scene. "Actually, Electrolux's advantages are not only in technology and brand. The height of technology is only relative, and the brand's variables are also very large." Electrolux and Liu Xiaoming both understand the rationale of turning short-term advantages into long-term advantages. Products, second-rate companies sell services, first-rate companies sell brands, and super-first-rate companies sell customer satisfaction. Customer satisfaction is a wealth that is not reflected on the balance sheet. "Electrolux is how customer satisfaction is transformed into Profitable: High customer satisfaction has a good reputation and can achieve repeat sales. Electrolux's series of products can earn profits in repeated sales of the brand. In fact, in Electrolux's new listing of air-conditioning sales at the beginning of the year, 30% of consumers were Electrolux brand affiliates. Repeated sales guided by customer satisfaction are cashing in profits step by step.

Protecting niche markets

(1) Establish differentiated advantages. If the main weapon of traditional competition is economies of scale, then the main weapon of modern competition is "differential advantage." The so-called "differential advantage" has two basic meanings. The first is "differentiation", which is different from competitors and has differences. This highlights the individuality of the company and requires the company to focus on product quality, price, service, promotion, etc. Selecting a few competitive methods and developing distinctive long-term niche are the basis for enterprises to seek competitive advantages and build a competitive bastion. The second is "advantage", that is, not only to form a difference with competitors, but also to make this difference my competitive advantage. This requires that the difference chosen by the enterprise must be competitive and capable of realizing resources. The difference is the method of concentration, and the advantage is the purpose of concentration.

(2) Constructing competition barriers with technological innovation. Guided by the potential demand of the market, according to the changes in the interests and concerns of target customers in the international market, we will keep technological innovation in line with market needs, and find breakthroughs in quality improvement in the areas that customers value most. After entering the U.S. market, Toyota Motor was challenged by many parties: German Volkswagen and Toyota are both small cars and the after-sales service is not worse than Toyota; powerful GM and Ford also started the development of small cars with government support; trade between the two countries Friction has more or less dampened the self-esteem of the American public. In order to consolidate the market, Toyota adopted a "technical innovation" strategy to defeat its rivals with new technologies. In 1970, the U.S. government promulgated the Muschi Act to limit vehicle emissions, and Toyota has listed efforts to develop fuel-saving and purification technologies as its development strategy. Research on this technology began in 1964. . In order to develop exhaust gas recirculation devices and catalyst converters, 100 billion yen of funds and 10,000 people have been invested in the past 7 years. The exhaust gas treatment system has developed three types, namely, Toyota catalytic method, Toyota lean combustion method, and Toyota catalytic method , And soon installed this device in the "Chaser" premium car, thereby gaining a leading position in this field. At the same time, it has also developed fuel-saving vehicles that save fuel by 25% to 30% with other Japanese automobile manufacturers, and has subsequently developed devices to prevent accidents and ensure driver safety after an accident. For Americans who are eager to drive an economy and safety car after the shock of the oil crisis, it is tantamount to a long dry spell.

In short, niche strategies are becoming the choice of globalization strategies for Chinese enterprises. ^[4]