Why Small and Medium-Sized Companies Should Use Market Niche Strategies

A market niche strategy is centred around focusing on a limited sector of the total market.

This is of particular use to the small and medium-sized companies that operate in markets dominated by larger operators. The situation for the smaller companies improves even more if they are able to identify an underserved pocket that they have the potential to create a differentiated offering for.

Selecting the Niche

By evaluating the attractiveness of a market and the potential strengths of the company to serve the market, a successful niche can be identified.

There is too much risk to take on larger companies in the larger market as the scale of production will outdo any smaller operation. This is the reason to move away from this mainstream flow and find pockets of the market to serve.

The organisation must focus its entire efforts on serving this niche to optimise chance at success.

About the Focus

Three main characteristics of successful niche strategies have been identified as:

1. Successful Segmentation. This may have to be creative to find an underserved pocket but it must match with the companies potential to serve it effectively.
2. Optimise R&D. With smaller operations not often having the expansive resources in this are, it must be used very effectively and can focus on improving a solution to a customer rather than reinventing one that may cost millions in research.
3. Small Works. The smaller the target, the more energy directed efficiently. Growth doesn’t hold the key in a niche, specialisation can cement a strong foothold in the market which is why all energy should stay on track towards the niche that has been chosen.

References:

Hooley, G, Piercy, N, Nicoulaud, B & Rudd, J 2017, Marketing Strategy & Competitive Positioning, 6th Ed., Pearson, Harlow, UK.