Niche market strategy for a mature marketplace

Abstract

Purpose
To examine how companies in the maturity stage of the product life cycle can implement and maintain a successful niche market strategy to increase competitiveness in the face of new competition, with particular reference to the global textile industry.

Design/methodology/approach
Responsible executives in eight firms in the textile and apparel/clothing sector in the USA were interviewed face‐to‐face or by telephone, or completed an online questionnaire. The sample contains leaders in the industry.

Findings
Research results suggest that niche marketing is an effective strategy for countering price competition in a mature industry and can use a niche market strategy. They identify key success factors, the most important factor of which was found to be a thorough understanding of the targeted consumers. It is concluded that the marketing mix plays a more important part than is generally suggested in the literature, by communicating non‐price product attributes to the niche market.

Research limitations/implications
The small sample limits generalization beyond the companies that participated in the study and comparable firms in the US textile and apparel/clothing industry.

Practical implications
This research study shows, within its limitations, that niche marketing is a promising global competitive strategy for mature industries. The study proposes practical guidelines for putting it into practice.

Originality/value
This study generally confirms the literature, but comes to some original further conclusions.

Full text

Niche market strategy for a
mature marketplace
Erin D. Parrish
University of Alabama, Tuscaloosa, Alabama, USA, and
Nancy L. Cassill and William Oxenham
North Carolina State University, Raleigh, North Carolina, USA
Abstract
Purpose – To examine how companies in the maturity stage of the product life cycle can implement
and maintain a successful niche market strategy to increase competitiveness in the face of new
competition, with particular reference to the global textile industry.
Design/methodology/approach – Responsible executives in eight firms in the textile and
apparel/clothing sector in the USA were interviewed face-to-face or by telephone, or completed an
online questionnaire. The sample contains leaders in the industry.
Findings – Research results suggest that niche marketing is an effective strategy for countering
price competition in a mature industry and can use a niche market strategy. They identify key success
factors, the most important factor of which was found to be a thorough understanding of the targeted
consumers. It is concluded that the marketing mix plays a more important part than is generally
suggested in the literature, by communicating non-price product attributes to the niche market.
Research limitations/implications – The small sample limits generalization beyond the
companies that participated in the study and comparable firms in the US textile and apparel/clothing
industry.
Practical implications – This research study shows, within its limitations, that niche marketing is
a promising global competitive strategy for mature industries. The study proposes practical
guidelines for putting it into practice.
Originality/value – This study generally confirms the literature, but comes to some original further
conclusions.
Keywords Niche marketing, Competitive strategy, United States of America, Textiles,
Clothing and accessories
Paper type Research paper
Note on the terminology
The characteristically American description “apparel” corresponds to the British term
“clothing.”
Introduction
Mature industries are characterized by increased competition and price deflation due to
overcapacity, in addition to a reduction in the number of firms (Porter, 1998a, b). Firms
in these mature markets begin to look for ways to stay afloat in a somewhat stagnant
marketplace, and as the stages of the product life cycle change, so do the key success
factors (Aaker, 1998). In order to remain successful in the maturity stage, companies
need to look for strategies to differentiate themselves from other firms, either through
price, product, marketing, distribution or service (Linneman and Stanton, 1991).
In terms of marketing, differentiation can be achieved come through branding, product
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-4503.htm
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Received August 2005
Revised July 2006
Accepted August 2006
Marketing Intelligence & Planning
Vol. 24 No. 7, 2006
pp. 694-707
qEmerald Group Publishing Limited
0263-4503
DOI 10.1108/02634500610711860

differentiation or market segmentation, to name only a few. In pursuing such
strategies, firms are practising what is commonly called “niche marketing.” Despite the
fact that its implementation has been identified as a key competitive strategy, there are
many questions surrounding how it can be put into practice.
This research study reported here examined the factors surrounding how
companies in the maturity stage of the product life cycle can identify, implement and
maintain a successful niche strategy. The specific objectives were to:
.examine niche markets from both a product and market perspective;
.analyze those factors which are important in the success of a niche market
strategy;
.examine the market research methods that companies use to discover potentially
successful niche markets and/or products; and
.create a marketing plan that firms competing in the mature product stage can
use to develop a niche market strategy.
The study focused on textile and apparel firms in the USA because they belong to a
mature industry characterized by overcapacity, which has resulted in price deflation
and a reduction in the number of firms (Dickerson, 1999). Also, the domestic textile and
apparel industry is severely at risk from increasing imports, since the elimination of
quotas in January 2005. Because of this increase in competition, US textile and apparel
firms have been exploring ways in which to remain competitive, one of which is niche
marketing.
Theoretical framework
The theoretical framework for this research was based on the view of trade
economists that specialization is the natural result of increased competition due to
trade liberalization. This school of economics argues that, as trade barriers decrease,
countries and firms will focus on their core competences and become more specialized.
Table I illustrates popular trade economists’ theories on specialization.
Decreased trade barriers have the greatest impact on mature industries, particularly
in developed countries, due to typically standardized production processes, which
lower the barriers to entry for less developed economies. An obvious example of this is
in the textile and apparel industry of developed countries. Application of the trade
economists’ theories to the mature textile and apparel industries of the USA and
Western Europe presumes that decreased trade barriers will result in remaining
successful firms focusing on specialization, or niche marketing.
Literature review
Niche market strategy
“Niche marketing” has been used synonymously with “market segmentation”
“target marketing” “micromarketing” “regional marketing” “focused marketing” and
“concentrated marketing” (Dalgic and Leeuw, 1994; Linneman and Stanton, 1992). It is,
however, none of these and all of these.
From an overall firm strategy perspective, a niche market strategy is defined as “an
emphasis on a particular need, or geographic, demographic or product segment”
(Teplensky et al., 1993). However, most literature focuses on the market perspective
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Era Trade theory Contribution Specialization
Classical trade theory Ricardo’s theory of comparative
advantage (Ricardo, 1817)
Introduction of a one factor model Countries will tend to specialize in those
products in which they enjoy low relative
labour costs
Neo-classical trade
theory
Heckscher-Ohlin trade theory of factor
proportions (Heckscher and Ohlin, 1991)
Introduction of a multi-factor model Countries will specialize in those goods
which are intensive in production in its
abundant factors and import those goods
which are intensive in its relatively
scarce factors
Post-neo-classical trade
theory
Posner’s technology trade gap theory
(Posner, 1961), Vernon’s product life
cycle theory (Vernon, 1966)
Introduction on technology as a factor Developed countries will tend to
specialize in new products. Developing
countries will tend to specialize in those
which are more standardized
Modern trade theory Porter’s competitive advantage of
nations model (Porter, 1998a, b)
Introduction of the importance of the
firm and country factors
Countries will specialize in those
industries in which the main
determinants are favourable for the firm
Table I.
Summary of theories of
trade
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versus the product or strategy perspective. Dalgic and Leeuw (1994, p. 40) write, in a
paper with the title Niche Marketing Revisited, that they “consider a niche (market) to
be a small market consisting of an individual customer or a small group of customers
with similar characteristics or needs.” Similarly, Kotler (2003, p. 280) defines a niche as
“a more narrowly defined group seeking a distinctive mix of benefits.” He states that
niche markets are usually constructed by dividing a segment into sub-segments and
that the key issue in niche marketing is specialization. Michaelson (1988, p. 20) defines
niche marketing as “finding small groups of customers that can be served within a
segment.”
Shani and Chalasani (1992, pp. 44-5) differentiate between market segmentation and
niche marketing. They characterize market segmentation as a top-down approach,
stating that it is “the process of breaking a large market into smaller and more
manageable submarkets.” By contrast, niche marketing is a bottom-up approach,
meaning that “the marketer starts from the needs of a few customers and gradually
builds up a larger customer base.” A literature search by Kara and Kaynak (1997) came
to the conclusion that niche marketing takes market segmentation one step further in
terms of creating a distinct group of customers. A textbook of market segmentation
defines niche marketing as a “form of concentrated target marketing” (Weinstein, 1994,
p. 210). Finally, Linneman and Stanton (1992) provide an overall idea of what niche
marketing actually is: the splitting of traditional markets into smaller segments and
then devising separate marketing programs for each of these smaller segments, or
niches.
Kotler (2003) describes five key characteristics of niche markets:
(1) the customers in the niche have a distinct set of needs;
(2) they will pay a premium price to the firm that best satisfies their needs;
(3) the niche is not likely to attract competitors;
(4) the niche marketer gains certain economies through specialization; and
(5) the niche has size, profit, and growth potential.
While there is no clear and consistent definition for niche marketing, it is fair to assert
that it is portrayed in the literature as a form of “pull” marketing – first identifying the
market and then developing a product for it. It is related to market segmentation in the
fact that it is a further segmentation of market segmentation. However, based on
Kotler’s (2003) characteristics of a traditional niche market, there is opportunity for
success using a “push” approach – developing a product and then looking for a market
for it.
We have already suggested elsewhere that the development and implementation of
niche market strategy versus traditional marketing techniques could potentially secure
the future of many ailing US textile and apparel companies (Parrish et al., 2004a, b).
Success factors
One of the most important factors in the success of niche marketing is relationships.
Dalgic and Leeuw (1994) stress that strong, long-term relationships can help build a
barrier to deter potential competitors and sustain long-term profitability as well as
customer retention. Another concept of major importance to a niche marketing
company is reputation. McKenna (1988) points out that niche strategies depend on
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word-of-mouth communication. People’s opinions play a crucial role in a product’s
success. In niche marketing, a company not only markets their product, but also their
business (Dalgic and Leeuw, 1994).
Besides relationships and reputation, Michaelson (1988, p. 23) believes that the first
rule of a niche market strategy is “to offer the customer a clearly differentiated product
that fills (or creates) a need.” He asserts, in Raynor (1992), that true niche marketing
must be based on the ability to provide products that meet actual customer needs.
The niche has to be real, and the product has to satisfy.
Various researchers have examined the important characteristics of a successful
niche market strategy. Dalgic and Leeuw (1994) defined five essential elements of niche
markets: positioning, profitability, distinctive competences, small market segments,
and adherence to the market concept. Kotler (1999, p. 28) suggests that the success of
niche marketers with a large market share derives from three key characteristics of
their marketing operations: they are strongly dedicated to their customers and offer
superior performance, responsive service, and punctual delivery, rather than low price;
their top management stays in direct and regular contact with key customers; they
emphasize continuous innovation directed at improving customer value. He later
added that they “tend to offer high value, charge a premium price, achieve lower
manufacturing costs, and shape a strong corporate culture and vision” (Kotler, 2003,
p. 271). Weinstein (1994) described firms practising niche marketing as
customer-driven, trend-setters/trend spotters, product and market innovators, and
creative marketing strategists. He found that true niche-based firms also recognize the
value of sound research and stand the test of time.
Linneman and Stanton (1991, p. 14) also emphasize the value of research as a
component of a niche market strategy, proposing in a textbook with the title Making
Niche Marketing Work, that the:
A-B-C-D of successful niche marketing is to “Always Be Collecting Data”...Successful niche
marketing requires many bits of information gathered over a period of time. This results in
small insights here and there, rather than in a sudden bolt of lightning from a gigantic,
once-a-year, last minute study.
Overall, it is vital that companies spend their time identifying and exploiting unique
segments rather than making broad assaults on entire industries (Hamermesh et al.,
1978).
Developing a strategy
The majority of previous research has focused on how a company can identify a
potential niche market simply by looking at their customer base. Shani and Chalasani
(1992), for example, suggest that marketers start from the needs of a few customers,
gradually build up a larger customer base, and then aggregate on the basis of
similarities, with an emphasis on the individual. McKenna (1988) asserts that a
company must think of customers as individuals, and respond to their special needs.
Linneman and Stanton (1992) agree that the best place to probe for new niches is a
company’s present customer base, which perhaps could be redefined into smaller
segments.
Even though most researchers agree that the first step in developing a niche market
is to examine the customer base, others point out the importance of product
development. Michaelson (1988) emphasizes that gaps in the market are identified by
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looking at points between product lines and at the high end or the low end. According
to McKenna (1988), niche markets are not easily identified in their infancy. It is
therefore important for managers to keep one foot in the technology, to know its
potential, and one foot in the market, to see opportunity.
Raynor (1992, p. 30) cautions that:
... market niches are not arbitrary segmentations that fall out of the mind of the marketing
department ... just because it might make sense for there to be a niche for white males aged
18-25 with incomes of $20,000-$25,000 doesn’t mean that there is such a market.
Methodology
Most of the limited research related to niche marketing has focused on the strategy
from a market viewpoint versus a firm’s viewpoint. None has addressed its value as a
competitive strategy for a mature industry. Therefore, a research study was initiated to
investigate the specific factors that it is important for firms to focus on when
implementing a niche market strategy in a mature marketplace and to propose a
marketing plan that such firms could use as a guide to its development.
In-depth interviews with executives in textile and apparel firms in the USA were the
source of the data for the study. A qualitative methodology and small sample were
chosen as appropriate to the exploratory nature of this research. A larger pool of
detailed but relatively unstructured information could thus be gathered relating to each
company than would be possible through a larger-scale quantitative survey (Yin,
1994). This would allow for additional insights, which is important because various
business situations and motivations could thereby be captured.
Instrument
The questionnaire used in the interviews was developedfrom a pilot study. Because there
is limited research on niche markets, a quantitative online survey was chosen for that
study as the best way to acquire the broad and descriptive data on which to base a later
qualitative study. The sample of firms was selected fromthe North American Textile Red
Book. The 52 initially contacted to participate in the survey, 19 took part: a 30.2 percent
response rate. Since, the average response rate for industry surveys is 21 percent,
according to Dillman (2000), this was deemed acceptable, particularly for a pilot study.
The results of the quantitative survey were used to identify and clarify niche
strategy issues, such as the characteristics of a successful niche market and/or product
and how successful niche markets and/or products are identified. One important trend
identified in the pilot study was the distinction of a niche market versus a niche
product, which was integrated into the interview questions. Also, the pilot-survey
respondents were asked to identify companies in the US textile and apparel industry
with successful niche markets/products. As far as possible, those identified were
included in the final study sample.
Respondents were asked a series of questions associated with niche marketing,
pertaining not only to the respondent’s current employer, but also to related experience.
These are set out in Table II. They served to give a degree of structure to the
qualitative research design and to act as a guide to the nature of the answers expected
from respondents. They do not represent a structured, quantitative questionnaire, for
respondents were free to range more widely in their comments.
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Sample
The firms chosen for the final qualitative survey were selected to provide a more
comprehensive examination of niche strategies used in the product pipeline.
A convenience sample of two companies was selected from each of four standard
industrial classification sectors within the industry: fibre and yarn producers, mill
product manufacturers, sewn-good producers, and “auxiliary” companies. Examples of
those categorized as auxiliary include consulting firms and research organizations,
which were included because of their role in guiding strategy throughout the textile
and apparel supply chain. They added a unique perspective not available from the
traditional textile and apparel firms.
A necessary condition for inclusion in the sample was that a firm had to have a
currently strong and successful niche market or be actively involved in guiding other
companies in the development of niche markets. This criterion was based on the
findings of the pilot study and the literature review with respect to the characteristics
of a strong niche market (profitable; insulated from competitors). In addition, the
companies had to be accessible and willing to participate in the study.
The final sample consisted of managers in six companies that currently utilize a
niche market strategy, one trade organization and one consulting firm: eight
respondents in total. A profile is presented in Table III. It represents US textile and
apparel firms considered to be leaders in niche marketing.
1 How would you define a niche market?
2 How would you differentiate between a niche strategy, market and product?
3 Why is marketing important? Examples?
4 Does your company utilize a niche market strategy? Why? How?
5 If yes, what effects has a niche strategy had on your company?
6 How does your company find a niche market and/or product?
7 Are there differences in the methodologies used for finding a niche market or product?
8 What factors are important in the success of a niche market strategy?
9 How do your niche markets/products compare to other market/products within your company?
10 What do you see as currently successful niche markets and/or products?
11 Do you see a niche strategy helping with pressure from import competition? In export markets?
12 What other strategies do you think will be helpful for competing with imports? In an export
market?
13 Do you have any other comments?
14 May I re-contact you with additional questions if necessary?
15 Do you have any recommendations for other people that I should speak to about niche markets?
Table II.
Interview questions
Company Research Respondent
A Fibre and Yarn Market development manager
B Fibre and Yarn Creative manager
C Mill products Vice President of marketing
D Mill products Product development manager
E Sewn goods Business Manager
Sewn goods President
G Auxiliary Vice President
H Auxiliary Director, market research and planning
Table III.
Sample description
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Data collection and analysis
The interviews were conducted during the Spring of 2003. The data were collected
from face-to-face interviews, telephone interviews and e-mail questionnaires.
The particular collection method was dependent on the location of the company and
the option that offered the most convenience to the respondent. The length of the
telephone and face-to-face interviews ranged from 30 min to 1h.
Collected data were first organized according to the four primary sectors, which
allowed for comparison within sectors. Second, the four sectors were compared for
similarities and difference in niche market strategies, allowing for an across sector
comparison. Third, the results were combined with secondary data on each company
and examined to determine trends in the development and implementation of a niche
market strategy.
Results and discussion
Niche strategy in practice
Research findings showed that textile and apparel firms are using a niche strategy to
compete with lower-priced imports. Most respondents agreed that their companies had
been more profitable as a result. One recurring theme throughout the interviews was
that it was almost impossible for US textile and apparel companies to compete on price,
Asian mills being often able to sell products at American cost levels. However,
domestic firms could differentiate themselves from the competition in order to create a
loyal customer base.
The survey results suggest two main rationales for a niche strategy: as an
incremental business strategy or as a defensive strategy. Most US textile and apparel
firms implement the strategy defensively. One respondent described it as “the last
beachhead to go in the war against imports.” Most companies regarded a niche
strategy as the only way to compete with imports. However, it must be fully supported
by a commitment to customer and market research as well as product development and
innovation. If the company does not do so, it cannot be completely successful.
Overall, a niche strategy was defined by the majority of respondents as a form of
market segmentation. However, the detail was much more complex and much less
concise. The interview results indicated that any product can be considered as one for a
niche market, depending on the company. For example, a two-door sports car is aimed
at a niche market by Honda, but is a basic product for Porsche. When defining a niche
market, some executives described it in terms of a market segment (such as Hispanic or
outsize), while others spoke of a specialized product (such as mildew resistant fabric or
wrinkle resistant weaves), and yet others defined it by reference to brand image.
Market perspective versus product perspective
When prompted, the entire research sample took more of a market than product
perspective on niche marketing strategy. However, the actual practices of the
companies presented a different picture. “Downstream” companies (sewn-goods
producers or auxiliary companies) tended to describe a niche strategy in terms of the
consumer market targeted. “Upstream” companies (fibre and yarn producers, mill
producers) had a tendency to characterize it by reference to the product, stressing the
importance of innovation and the technical properties of specific products. One factor
contributing to this trend is that sewn-goods producers and auxiliary companies are
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closer to the consumer. These companies are more easily able to monitor spending and
consumption patterns, and thereby have greater insight into market characteristics.
Another factor is that upstream companies invest more capital in research and
development, reflecting the technologically intensive nature of the fibre/yarn/fabric
industry.
Niche market success factors
Consumer base. The research sample agreed that potential as a niche market depended
on a strong, loyal consumer base that would not easily be swayed by the competition
and on a smaller and more specialized nature that would not attract too much
competition. One respondent stated that if a market, no matter how small, was
profitable, it would attract competition, which is why a loyal consumer base was so
important. However, there is obviously a downward size limit on profitability.
Market research. Research results suggest that the most important factor in the
success of a niche market is knowledge of the consumer. Companies need to
understand consumers’ wants and needs, and must focus on the right market for their
product. Firms could gain this understanding by communicating with the consumer
through intense and extensive market research. As one respondent put it, “if you don’t
talk to the consumer, someone else will.” Also, by knowing the market better than the
competition, a company will be better positioned to identify the most profitable
segments. Because timing is important, market research will enable a company to
identify the right market at the right time.
Other important factors. The research sample also believed that offering a specific
service to the market – such as customer service, quick returns or shortened lead
times – could differentiate a firm from the competition. By offering these services, a
company has the potential to develop a niche market. In addition, offering a group of
consumers what they perceive as value is important in the success of a niche marketing
strategy. Again, a firm must understand the consumer well, given that perceptions of
value vary among consumer groups.
Niche market identification
Every firm in the research sample used market research, to identify either a market or a
need within a market. The techniques used varied, some companies believing in
talking directly with consumers but others relying on market research reports, such as
population trends or analyses of the competition. The aim was to identify the market
with the highest growth potential.
Other suggestions from respondents were to expand an already existing brand into
another product in another market. The viability of this strategy would depend on the
brand image matching the consumer group. Also a company could distribute an
already existing product through non-traditional retail outlets, such as the internet.
Specifically, mentioned was e-Bay. By developing a distribution strategy different
from the competition, a company can create a niche market.
Niche product success factors
Specialized product. From the product perspective, a company must offer a product
uniquely different from the competition, which appeals to a select segment of the
market. This can be done by offering an innovative, technologically advanced product
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or a “value” product. Whichever type complements a firm’s core competences, it must
match the consumer’s wants and/or needs if the strategy is to be successful.
Marketing. Development of a niche product does not guarantee a perceived need,
and a marketing campaign may be needed to convert a latent need into an actual want.
All firms in the sample believed that products could be differentiated by marketing.
One respondent pointed out that emotional and intrinsic differentiation can be more
effective then functional differentiation. The way to convey that to the consumer is
through effective deployment of the marketing mix. Numerous respondents spoke of
the “four Ps” emphasising that the niche product “message” had to be clearly
communicated to the consumer.
Brand image. One recurrent theme throughout the interviews was the ability of a
company to differentiate through brand image. If a company can create a strong brand
in one area, they can extend it to other markets. By developing a niche strategy with a
strong brand name, it can build a loyal consumer base. Also, companies can diversify
their brand portfolios by finding, acquiring or licensing a new brand to reach a certain
market and create a successful niche strategy. By licensing an already existing brand,
a company can transfer that specific lifestyle image to their own product, creating a
level of perceived value. One respondent went as far as to say that “without brand,
a company has no future.” It is important to note that, although the majority of
respondents stressed the importance of branding to the future of a company, they also
noted that brands are becoming less important to some consumers. Because not all
consumers are brand conscientious, it is extremely important to fully understand the
market and the distribution channel.
Other important factors. Respondents suggested other factors which can
differentiate a product enough to create a niche, such as a feature that the
competition does not offer. This can be in terms of innovation, quality, or a technology
yet to be tapped. A niche product can sometimes command a higher price point
because it meets the needs of the consumer better than the competition, but that price
point must be competitive. A company must know what the consumer is willing to pay.
Finally, the product has to be financially viable for the company to develop,
manufacture, market and distribute.
Niche product identification
The majority of respondents stated that innovation and research and development are
the main strategies used to develop a niche product. One pointed out that a firm can
accidentally stumble upon one when developing another for which there is already a
market. Another way in which a company can create a niche product is through brand
expansion or licensing. It is important when developing a niche market to find the way
to create demand for the product, through marketing and branding.
Conclusions, limitations, and implications
The findings of the study reported here suggest that textile and apparel firms in the
USA have taken the initiative to start developing a niche strategy in order to compete
with lower priced imports, but with varying degrees of success. Those with smaller
manufacturing bases located in the USA, mainly the “downstream” companies, had
more faith that by implementing a niche market strategy the company would remain
successful. The “upstream” companies believed that this strategy would help, but
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might not be enough, given the price pressure from imports. All were using niche
marketing as a defensive strategy rather than an incremental business strategy.
The likely explanation is that the decline in the US textile and apparel brought about
by import penetration requires domestic firms to defend their current market share by
becoming more competitive. This finding concurs with the predictions of trade
economists that increased trade liberalization results in specialization.
The findings also show that a firm adopting a niche marketing strategy becomes
more focused on the consumer and more able to identify profitable segments, and
thereby an effective competitor against the threat from abroad. That is applicable to
most industries in the maturity stage of the product life cycle which face increasing
competitive pressure.
It is clear that the concept of niche is a complex, made up of three main components:
strategy, product, and market. A niche strategy describes an overall business strategy
focused on the customer. A niche marketing strategy is characterized as a pull
marketing approach in which the company identifies a potential market segment and
then develops or refines a product for that particular market. A niche product strategy
is characterized as a push marketing approach in which the company develops a
product before seeking a suitable market segment for it. This finding corroborates the
view of Shani and Chalasani (1992) that a niche strategy will take either a “bottom up”
or “top down” approach. Whichever approach is adopted, it has to have full support
throughout the company.
Not reflected in the literature is the finding that “upstream” companies pursue both
a niche product and niche market strategy, while their “downstream” counterparts
tend to concentrate on the latter. At the overall business strategy level, those firms
located farthest away from the final consumer in the supply chain (upstream) would
tend to focus equally on both product development and market research. On the other
hand, those closest to the consumer in the supply chain (downstream) would also focus
on product development, but would place more emphasis on market research.
For those firms that do take the niche market approach, developing a strong, loyal
consumer base, it is important to understand their consumers through market research,
as a precondition for the offering of service and perceived value. The literature states
that customer relationships are exceptionally important for a niche market strategy to
be successful. However, it focuses more on developing relationships to build customer
loyalty than on developing them with the aim of fully understanding the market in
order to better fit its needs.
To identify potential niche markets, a company can use market research at the level
of primary consumer-customer intelligence gathering or through secondary
industry-level research and trend data. While the literature addresses the use of
market research in niche strategy development, it neglects its application to the
possible expansion of a brand to other markets or distribution of a product through
non-traditional retail outlets.
For those firms that focus on a niche product approach, it is vital to have a
specialized product that meets markets needs better than the competition can.
This conclusion is consistent with the literature. However, the research findings further
indicate that communicating to the consumer via a marketing campaign can enable a
firm to create a need and/or want for a specific product. Also important is brand image.
However, a company must understand the consumer in order to know whether that
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segment of the market is brand loyal. Other factors which can contribute to the success
of a niche product are feature differentiation, through quality, price (not low), value,
innovation, technology, or any combination of these attributes. One crucial aspect of a
niche product strategy is that the product has to be financially viable for the firm.
In order to identify potential niche products, respondent firms most commonly used
innovation and research and development, which coincides with the findings of the
literature review. The literature is silent, however, on brand expansion and the creating
of a need for a specific product through marketing.
The research findings corroborate the assertion of Kotler (1999) that companies with
a successful niche strategy are strongly dedicated to their customers, offering them
superior performance, responsive service, and punctual delivery (rather than low
price), that they stay in direct and regular contact with key customers, and that they
emphasize continuous innovation directed at improving customer value. However, the
research also found that those firms with successful niche strategies additionally
have strong marketing capabilities, a specialized product, a thorough understanding of
the market, the support of the entire company, and a loyal and steadfast consumer
base.
Managerial implications
The research findings suggest strongly that niche marketing is a promising global
competitive strategy for mature industries, particularly those threatened by
lower-priced imports. They can implement it in two ways: with a push strategy that
creates a product and finds a market for it, or with a pull strategy that identifies a
market and develops a product to meet its needs. Table IV offers a marketing planning
framework that firms in the mature stage of the product lifecycle can use to develop a
niche market strategy based on their core competences. It takes the form of a series
Niche market strategy
What are the firm’s core competences?
Who are the firm’s major customers/consumers?
Who are the firm’s minor customers/consumers?
Market research Product research
Can the firm service the market differently from
present? Different from the competition?
How is the firm’s product(s) different from the
competition? Can it be improved or altered?
How do the firm’s customers/consumers perceive
value?
Is the product intrinsically differentiated from the
competition? Can it be?
What are the needs/wants of the
customers/consumers?
Can the product be differentiated from the
competition by marketing?
How are the needs/wants of the market
changing? Predicted to change?
Can the message of differentiation be more
clearly communicated to the market?
What is the firm’s competition doing well? Can
the firm attack the market from a different
perspective?
Can the product be marketed differently in order
to appeal to a different consumer segment?
What are the trends in the marketplace? How are
they changing?
Can branding be used to create a “lifestyle image”
Can the firm sell the products through a different
outlet?
Is brand acquisition possible to complement the
firm’s core competences?
Does the firm have a strong brand that can be
expanded to other product lines?
Does the firm’s product create perceived value for
the market? Is the price right?
Table IV.
Market planning
framework for
implementation of a niche
market strategy
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of questions, the answers to which are the basis of specific strategic and tactical
implementation decisions.
Limitations
A key methodological limitation that should be considered when interpreting the
results of this study is the limited sample size. The findings can be generalized only
cautiously beyond the eight companies that participated in the study into the rest of the
US textile and apparel industry. Further, research is certainly required before any
general conclusions and recommendations can be applied to equivalent firms in other
countries or to companies in other sectors facing the same threat. Specifically, the
finding that branding was seen as a key element of overall strategy must be weighed
against the fact that no retailer took part in the survey.
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Corresponding author
Erin D. Parrish can be contacted at: eparrish@us.edu
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