Thursday, September 18, 2014

The Benefits of Niche Markets on Small Business Success

Small and large businesses use different approaches to successfully navigating their markets based upon the resources available to them. Large businesses reach for larger target segments while smaller businesses focus on attracting a smaller group of motivated customers. Niche markets offer an entry position for small business to start building their customer base before expanding into new niches.

Small Business Does Well in Underserved Markets

Small businesses are likely to succeed in markets currently not being served sufficiently by other businesses. They do so through creating brand recognition among those that desires their unique types of products and services.  Highly motivated customers will recognize the brand the next time they consider making a purchase.

For example, it would be extremely difficult for a small business to compete against a large retail outlet by selling disposable pens. However, through selling unique pens, customized pens, embroidered pens, and handmade pens they can offer products that larger stores wouldn’t find lucrative enough to carry in their national chains. 

Customers will remember the specialty store as the easiest and most convenience place to purchase their chose products. The customer weighs and balances all of their options and knows that such gifts are easier to obtain from the customized provider. There is little reason to drive from store to store trying to save a few dollars when a specialty store has what you want. 

Small Business Can Expand Revenue through Complementary Products and Services

Once a small business reaches a sustainable level within their niche product/ service market they can consider adding additional products and services to expand revenue streams. In the example of pens, the business might also consider complementary niches such as unique stationary and paper.  

Selling similar niche products provides opportunities for overlapping benefits (Bruggeman, et. al., 2012). Pens and stationary are categorically connected in consumer minds and if they are looking for high quality pen and paper they have a place to obtain these items. The two types of products regularly attract the same types of people. 

Niche business also allows for successful niche marketing that improves the success rate of the business (Rankin, 2007). Marketing efforts can be focused specifically toward those customers who are most likely to buy a particular product.  Such efforts cut down on waste and low investment returns in business expenses. 

Bruggeman, J. et. al. (2012). Market positioning: the shifting effects of niche overlap. Industrial & Corporate Change, 21 (6). 

Rankin, M. (2007). Niche marketing allows advisers to build habitat for business success. Employee Benefit Adviser, 5 (12).

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