In most markets there is one dominant (mass) segment and several smaller (niche) segments.

 

For example, in the confectionery market, a dominant segment would be the plain chocolate bar. Over 90% of the sales in this segment are made by three dominant producers – Cadbury's, Nestle and Mars. However, there are many small, specialist niche segments (e.g. luxury, organic or fair-trade chocolate).

 

Niche marketing can be defined as:

 

Where a business targets a smaller segment of a larger market, where customers have specific needs and wants

 

Targeting a product or service at a niche segment has several advantages for a business (particularly a small business):

 

• Less competition – the firm is a "big fish in a small pond"

 

• Clear focus - target particular customers (often easier to find and reach too)

 

• Builds up specialist skill and knowledge = market expertise

 

• Can often charge a higher price – customers are prepared to pay for expertise

 

• Profit margins often higher

 

• Customers tend to be more loyal

 

The main disadvantages of marketing to a niche include:

 

• Lack of "economies of scale" (these are lower unit costs that arise from operating at high production volumes)

 

• Risk of over dependence on a single product or market

 

• Likely to attract competition if successful

 

• Vulnerable to market changes – all "eggs in one basket"

 

By contrast, mass marketing can be defined as:

 

Where a business sells into the largest part of the market, where there are many similar products on offer

 

The key features of a mass market are as follows:

 

• Customers form the majority in the market

 

• Customer needs and wants are more "general" & less "specific"

 

• Associated with higher production output and capacity (economies of scale)

 

• Success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands

 

Knowing the differences between Niche market and mass market can help you decide what kind of products you want to drop ship.

 

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