Lesson 3 : Niche Markets/Marketing 6/9/24 Flashcards
1
Q
What is the definition of Niche Marketplace?
A
A smaller section of a larger market. EG. Specialist golf shop (Mass market would be sports equipment)
2
Q
Advantages of Niche Markets - Less competition
A
- Large firms are not attracted into ‘Niche Markets’ because there is not enough profit in niche markets to enable large firms to consider entry worthwhile.
- Niche firms therefore face much less competition than they do in mass markets.
3
Q
Advantages of Niche Markets - More Tailored Products
A
- Niche firms can tailor their products to suit specific customer tastes or requirements. Eg. a specialist cake decorating business.
- This enables niche market firms to attract enough customers to produce healthy sales and profits.
4
Q
Advantages of Niche Markets - Lower advertising costs
A
- Niche firms tend to have a relatively small customer base that is often concentrated in the local area.
- This means that they do not need expensive nationwide promotion eg. TV adverts.
- This lowers their advertising costs and hence their overall costs of production.
5
Q
Disadvantages of Niche Markets - Higher price
A
- Niche market firms cannot benefit from Economies of Scale such as ‘Purchasing Economies of Scale’.
- This is because niche market firms typically have relatively small numbers of customers.
- This means that for a niche market firm, average costs of production will be higher since they are unable to exploit the EOS and get discounts or bulk buy.
- This implies higher prices will need to be charged in order to make a profit.
6
Q
Disadvantages of Niche Markets - Difficult to get retailers to stock the product
A
- Eg. A firm that makes handmade leather wallets; A niche producer may find it difficult to get retail stores like Selfridges to stock its product
- This is because Selfridges will be concerned that they aren’t able to sell many units of the niche product.
- They would rather stock a well known mass market product that will earn them much more money
7
Q
Disadvantages of Niche Markets -
Vulnerable to market change
A
- Niche firms will typically only have one or two product lines available for sale.
- If customer tastes and preferences alter, eg. customers no longer want to buy ‘model making’ kits, a niche producer will have no other products to fall back on.
- This makes survival more difficult for firms that operate in a niche market
8
Q
What is the definition of Price elastic?
A
When consumers are very sensitive to changes in price.
9
Q
What is the definition of Segmentation?
A
The breaking down of a mass firm into smaller units. Eg. Shoes company → Shoes for men x Shoes for women
