Wednesday, July 22, 2009

Niche Leadership...What Next??

Some companies have achieved a very high dominance in their niches but in spite of those examples, it will not be unfair to say that there is a limit to how much you can succeed in a niche. At the least, the gap between the marginal cost of gaining market share and the marginal benefit will become far less attractive after having achieved a high market share in their defined niches.

Several companies have followed different strategies to grow their business after they have reached their maximum potential in their niches:

Expand geographically

Niche players tend to dominate in a small region. With international tariff, non-tariff and cultural barriers coming down, it is easy to access similar niches in other countries and regions. Hohner in harmonicas, Tetra in tropical fish feed, Steiner in military binoculars have all achieved a worldwide market share of over 50% in their defined niche.

Expand the niche

Many niches marketers cater to aspirational groups. There would be a number of individuals want to be part of the group but cannot be because they lack certain key abilities or are not sufficiently motivated. Several companies have come up with ideas to grow their niches. Honda plans to introduce two models, CBR1000 and VR800, to tap the nascent superbike segment in India. In order to grow the market, Honda intends to include riding lessons as well, for those with no experience of riding a superbike. Other such examples are the Nikon school and the BMW performance driving school

Up-sell and cross-sell

Once a company has acquired the loyalty of customers in a niche, it can leverage its goodwill to sell other products to its customers. Harley Davidson has been doing that by selling biking accessories jackets, saddlebags, etc. Even Royal Enfield has now started drawing significant revenues from its line of add on kits.

From niche to differentiated product

Several companies have made the transition from being a niche player to being a company with a differentiated product serving the general market.
Micromax succeeded in becoming the market leader in the rural mobile phone market in India. Now, they are trying to sell to the rest of the Indian market. The clothing and sorts good industry has several examples like North Face, Underarmour and Billabong, who started off as niche marketers but now cater to the general market. Some of these have made the transition smoothly but some others have had a rough time. HTC withdrew several models which affected its image of a seller of high end, touch screen based smart phones. Several sellers of high end products tried to expand their market by introducing low priced products. Notably, fashion brands like Gucci and Burberry have suffered heavily because of this strategy.


Sometimes a company may decide that it is very well configured to cater to a niche. Rather than expand by catering to the whole market, the company may prefer to concentrate on another niche in addition to the one currently being served. Over time, the company would hope to acquire the reputation of a marketer proficient in handling niches. Infomedia 18 has six special interest magazines like AV Max, Better Photography and T3 but its publishing arm has resisted coming out with a general interest magazine like Newsweek or India Today.

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