Relevance and importance

Some experts assert that companies must shift away from attempting to market products or services to the whole market. They argue that if they do not niche they will sooner or later be facing competitors who are operating as niche players. Niche players can often command a premium price for their goods or services. It can enable an SME, even with limited resources, to build and maintain a base of loyal, committed, and profitable customers. Further, the SME may be able to compete with much larger competitors through operating in a niche. Increased competition is leading toward consolidation and convergence in many industries and this often leads companies down a path where there will have to be niche players in the market to meet the needs of customers.

Overview

Some characteristics of being a niche player:

	Often highly successful niche players operate in a niche within a much larger market. Firms with low market share can still be highly profitable as they can command higher prices compared to those of competitors.
	They provide customised offerings to meet the ever-changing needs and demands of customers. As their offer is highly targeted and focused niche players get to know the customer groups very well and can therefore learn to meet customer needs better than larger competitors.
	The SME can serve a niche effectively if the niche is large enough to be profitable and has growth potential. The company can build skills and customer loyalty to defend itself against larger competitors as the niche grows and becomes more attractive. Loyal clients will frequently help to attract new customers through word of mouth recommendation.
	The key to being a niche player is specialisation. The product/service, customer, market, promotion, price or distribution can all be bases for specialisation.
	Can reduce the need to hold stock.

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Recommendations and practical tips

Some suggestions for becoming a successful niche player:

	Research the market to find a niche that is safe and profitable with the right type of customers appropriate for your proposition.
	Consider serving customer groups who may be too small or unimportant for the larger competitors in the market.
	Successful specialisation may be achieved by addressing geographic markets that others ignore, or by focusing only on a particular region or locality.
	Developing two or more niches may increase the chances for success.
	Listening to the customer and differentiating the product can create loyalty among the customers.

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Warnings and potential pitfalls

Despite the many potential advantages, becoming a niche player may present a number of difficulties:

	The niche strategy can limit the company's future growth prospects as the market may be relatively small.
	The market niche may dry up. Consider if it is defensible or if it will inevitably disappear.
	The niche may grow to the point where it attracts larger more powerful competitors.
	It is becoming more common for large companies, or sections of large companies, to become niche players and therefore compete directly with the established niche operators.

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