Market Nicher Strategies

Almost every industry includes firms that specialize in serving market niches. Instead of pursuing the whole market or even large segments of the market, these firms target segments within segments or niches. This is particularly true of smaller firms because of their limited resources. Smaller divisions of larger firms also pursue niching strategies. EG & G is an example of a large company that profitably employs ;a niching strategy:

EG & (i is a $1.4 billion industrial equipment and components company consisting of over 175 distinct and independent business units, many with less than $10 million in sales in markets worth $25 million. Many EG & G business units have their own R & D, manufacturing and sales force operations. The company is currently the market or technical leader in 80 per cent of its niche markets. More astonishing, EG & G

Fisherman's Friend unique packaging, advertising and .function help it hold its market niche.

ranked second in earnings per share and first in profitability in the Fortxine 1000. EG & G illustrates how niche marketing may pay larger dividends than mass marketing.

Tlie main point is that firms with low shares of the total market can be highly profitable through clever niching (sec Marketing Highlight 12.4).

One study of highly successful mid-size companies found that, in almost all cases, these companies niched within a larger market rather than going after the whole market.2S Two of 'Europe's most respected companies',2'1 De La Rue and Reuters, both fall into this category. De La Rue's niche is banknote printing and payment handling systems, while Reuters provides news and financial information, usually screen-based.

Why is niching profitable? The main reason is that the market nicher ends up knowing the target customer group so well that it meets their needs better than other firms which casually sell to this niche. As a result, the nieher can charge a substantial mark-up over costs because of the added value. Whereas the mass marketer achieves high volume, the nicher achieves high margins.

Nichers try to find one or more market niches that are safe and profitable. An ideal market niche is big enough to be profitable and has growth potential. It is one that the firm can serve effectively. Perhaps most importantly, the niche is of little interest to large competitors. The firm can build the skills and customer goodwill to defend itself against an attacking big competitor as the niche grows ami becomes more attractive.

The key idea in nichemanship is specialization. The firm has to specialize along market, customer, product or marketing-mix lines. Here are several specialist roles open to a market nicher:

• End-use specialist. The firm specializes in serving one type of end-use customer. For example, Reuters provides financial information and news to professionals and Moss Bros' strength is in clothes hire.

Concentrated Marketing: Two Nice Niches



Jo Brand is a size-challenged comedienne whose act often includes two themes; her size and her love for cakes. The following two niche companies are for her. One is old and one is new. They are Betty's Cafe Tea Rooms and 1647, the clothes shops owned by-comedienne Dawn French.


Betty's Cafe Tea Room

There are only four Betty's Cafe Tea Rooms and one Taylor's Tea Room, all in Yorkshire, but they serve 2 million cups of tea a year - it is Che British tea room. They do not advertise, yet year round people queue tor a chance to taste their exquisitely expensive tea, coffee and cakes. Once inside, the guests find themselves in a quiet room where a pianist plays light classical music. The rooms are simple, but rich with the atmosphere of times past. Serving are formally dressed waiters, or waitresses wearing black skirt, starched white blouse and apron - the embodiment of Victorian servants. Betty's is proud of its heritage and quietly boasts of the York Betty's being built by 'the same team of craftsmen who were responsible for the ornate decor of the luxury liner, the Queen Mary ... During the last war it was the favourite haunt of the thousands of airmen and servicemen stationed around York. Many left there a permanent reminder of their visit by inscribing their names onto the mirror which now hangs in the Oak Room.'

The first Betty's was opened in Harrogate in 1919 by Fredrick Belrnorit, a Swiss confectioner who travelled to London to make his fortune. He visited the Yorkshire Dales, liked it, stayed and started Betty's. His timing was as good as his patisserie. Harrogate was booming and Betty's was just about the only place an unehaperoned woman could go. Then and now Betty's succeeds because of the quality of what it serves and its employees. The range and quality of cakes are such that customers need a description of what each is. The pastries range from exotic Amadeus tort and Venetian festival cake to local Yorkshire curd tarts and fat rascals. Here Betty's keeps close to its Swiss roots; the bakers and confectioners train at Richemont College, Lucerne,

Like many clever companies, Betty's is a multiple nieher. It has diversified into other businesses close to its original business. At each of its Cafe Tea Rooms it also has a retail outlet selling expensive gift-oriented confectioner;', which suits their location in tourist towns. It also has a mail-order business selling cakes, chocolates and speciality teas and coffees by post. Finally, it markets Yorkshire Tea, a brand sold and positioned nationally as a traditional Yorkshire 'cuppa'. As part of the promotion for this brand, the tea is supplied, free of charge, to all northern branches of the Women's Institute, a long-established organization of middle-aged, middle-class gentlewomen.

Dawn French Fashions

A study of the contours of 5,000 women just after the Second World War links Betty's golden age to Dawn French's fashions. The study's results gave tht: British Standard Sizes - 12,14, 16 and so on -that have pained many people ever since. The sizes worked well in the 1950s when food rationing had just ended and people walked a lot, but not now. A recent study of women's contours by J.D. Williams shows that things have changed. For years the company has been selling mailorder clothes to women with a fuller figure who were unable to get suitable clothes from high-street stores. Nigel Green, marketing director of J.D. Williams' Classic Combinations catalogue business, explains;

Today's woman enjoys a far inore self-indulgent lifestyle and is not only taller, but has a noticeably bigger and lower bust, an appreciably larger waist and rib cage, a more rounded tummy, a larger and flatter bottom and far fuller upper arms. And while her hip size may still be ,56 inches [1 in = 2.54 cm], the standard British figure [the original size 12] is now more likely to be 38-28-36 than

36-24-36 ... The old-fashioned dress sizes meant that women in this country have learned to live with ill-fitting clothes; blouses that gape, waistbands that cut and skirts that ride up.

Nigel Green believes these new sizes will give his niche company an extra USP (unique selling proposition).

Other moves are afoot in the high street. 'Women are no longer prepared to put their lives on hold until they can starve themselves down to size 14,' says Christina Bounce, group marketing and merchandising director for Country Casuals Holdings. She goes on: 'They are generally feeling happier about their own size, even when it doesn't conform to fashion stereotypes.' C & A and D.H. Evans, the Outsize Shop, have long served the outsize market, but the emerging market shows that women no longer feel the need to don masks before entering the premises.

Dawn French's shops, 1647, sell high fashions — not just upsized 12s, cover-all T-shirts and leggings - designed for the amply proportioned. Few in the trade believe the claim implicit in the shop name that 47 per cent of women are over size 16, but the huge suecess of niche retailers aiming at the market shows where the future lies. Within a year of start-up Ann Harvey shops, for sizes 16 to 26, grew from the initial 20 stand-alone stores to 38, and 2 concessions and a further 12 are scheduled.

'There is correlation between age and increased size and obesity,' says Verdict's GHve Vaughan. So, as the middle-aged market grows in number, affluence and girth, the outsize market is a good niche to target. But as Joan Miller, training co-ordinator of Betty's Cafe Tea Rooms, says: 'If everyone round here decides to get health conscious, we're in real trouble.'

Sources: Nicholas Lander, 'British tea and torte', Financial TVmes (4-5 June 1994), p. XI; Virginia Matthews, 'Oversized and over here", Marketing Week (2,1 September 1994), p. 25.

Vertical-level specialist The firm specializes at some level of the production-distribution cycle. For example, the Dutch-based Anglo-Italian company, EVC, is Europe's leading manufacturer of polyvhiylchloride (PVC), while Country Homes' niche is as an intermediary between owners of country cottages and people who want to hire them for holidays. specialist The firm concentrates on selling to cither small, medium or large customers. Many nichers specialize in serving small customers neglected by the large companies, Fuji gained its initial success in the photocopying market by specializing on small firms neglected by Xerox. Many regional advertising agencies also specialize in serving medium-sized clients.

Specific -customer specialist The firm limits its selling to one or a few large customers. There are many firms like this in the motor industry: for example, Unipart devotes most of its time to BM\V/Kover.

Geographical specialist. The firm sells only in a certain locality, region or area of the world. Most retail banks stay within their national boundaries. Two odd exceptions to this rule are the European HSBC and Standard & Charter, whose main interest is south-east Asia.

Product or feature specialist. The firm specializes in producing a certain product, product line or product feature - Rolls-Royce is the only supplier of tilt-thrust jet engines.

Quality-price specialist. The firm operates at the low or high end of the market. For example, Hewlett-Packard specializes in the high-quality, high-price end of the hand-calculator market, while Tring International sells very cheap CDs.

multiple niching Adopting a strategy of having several independent offerings that appeal to several different sv&segntents of consumer.

• Service specialist The firm offers one or more services not available from other firms: for example, NASA's ability to recover and repair satellites.

Niching carries a very significant risk, in that the market niche may dry up or he attacked. Porsche was hit by both of these threats when the demand for luxury cars declined in the early 1990s and Honda, Toyota and Mazda attacked the sports car market. On ;j different scale, innovation and intense competition between multinationals and social trends eventually killed off Pollards Cornish Ice Cream./10 Its niche was selling high-fat dairy ice cream - an estimated 100 calories per cone - to the declining number of tourists in the south-west of England.

The danger of the disappearing niche is why many companies use multiple moiling. By developing two or more niches, the company increases its chances of survival. Most of the wealth of successful healthcare companies comes from their each having products in a few niches that they dominate. For instance, Sweden's Gambio concentrates on'renal care, cardiovascular surgery, intensive care and anaesthesia, blood compound technology and preventive health services. The need for multiple niching is shown by SmithKline Beecham's Tagamet sales dropping 76 per cent in the quarter that it lost patent cover in the United States.31

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  • Haris
    What are the roles that are open to a market nicher?
    3 years ago

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