Download Niche Marketing and the Importance of Product

Niche Marketing and the Importance
of Product Differentiation
Kynda R. Curtis, University of Nevada, Reno
([email protected])
Stuart T. Nakamoto, University of Hawaii at
Manoa ([email protected])
Overview
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Two competition strategies
Niche marketing steps
Product differentiation strategies
Promotion and Pricing
Producer payoff
Competing – Option One
Lowest-priced provider
– Substitutable product
– Results in lower cost over
competitors
– Production/marketing efficient
• Economies of size (scale & scope)
– Typically involves expansion
– Difficult to maintain
• New firms can duplicate process
• Compete with low labor costs in other countries
• Requires continual investment in cost-reducing technology
Competing – Option Two
Niche marketing
(= market segmentation + product
positioning)
– Differentiated product
• Product is consumer centered
• Product has specific characteristics
– No constant pressure to cut costs
– May require technical labor
and/or innovative technology
Definition of Niche Marketing
(= market segmentation + product positioning)
• Supplying a specialty good or service to a market
segment or targeted group of consumers
– Previously underserved market
– Market unsatisfied with mainstream product
• New product
• Variation on an existing product
– Unique attribute (characteristic)
– Different service
Niche Marketing Steps
• Identify niche/target market
• Identify needs of that market
– Surveys, focus groups, product testing, etc.
• Select product differentiation
strategy which meets
market needs
– Characteristics, packaging,
delivery, etc.
Niche or Target Markets
May be defined by……
– Geographic region
• Country, state, city, neighborhood
– Socioeconomic characteristics
• Age, Ethnicity, Religion, Education, Gender, Income, etc
– Tastes & Preferences
• Health & nutrition
• Hedonistic characteristics – convenience, time savings, ease of
use, support certain causes
Example Niche Market
• Buyers, who are they?
– 30-50 year age group, primarily female, married, college educated,
home owner
• What are their needs?
– Health conscious (diet), support locally grown, price not a major
concern if product warrants it.
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Where/How do they purchase?
– Natural food stores, mail order, farmers’ markets
• What types of media do they use?
– Radio - mornings and late afternoon
– TV - early evenings and weekends
– Newspaper- Sunday
Differentiation Strategies
• Should focus on needs of niche/target
market
– Product specific
– Process specific
• Customer willing to pay a price that
covers seller costs
– Both parties must gain
Product Specific Differentiation
Strategies
• Observable Characteristics
– Sight, smell, touch, sound
• Experience Characteristics
– Taste, texture
– functionality (shelf life, maturity)
• Brands and labels
• Customer loyalty
Process Specific Differentiation
Strategies
• Credence characteristics
– Production practices
– Production location
• Labeling and 3rd-party certification
• Marketing practices
Producer Payoff
• Studies show consumers willing to pay premiums
for identified characteristics (labeling, promotion,
3rd-party certification)
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Food safety
Specific nations/areas of origin
Natural/organic/reduced chemical inputs
Humane animal treatment
Nutritional related factors (e.g. high antioxidant, low
fat)
Market Outlets
• Where does your target market shop?
– Direct-to-Consumer (Direct Marketing)
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Farmers’ markets
Catering
Internet/mail-order
Restaurants
Roadside/farm stands, CSA, pick-your-own, etc
– Retail
• Supermarkets
• Small grocery
• Natural food stores
– Agr/rec tourism
Product Promotion &
Advertising
• Advertising (persuade)
• Promotion (inform & educate)
• Focus contingent on market
preferences
– Media: Radio, newspaper, television
• Time of day/week; section of newspaper
• PR—human interest stories, food articles
– On site (Point-of-Purchase or POP): Store
display/samples, table tent cards, farmers markets,
cooking demonstrations
– Materials, samples, presentations
– Events: Farm tours, festivals, holidays
Pricing
• Role of cost of production & marketing
– Associated break-even prices & volumes
• Price & availability of competitive
goods
– Substitutes, complements & ability to
“isolate” the target market
• Elasticity of demand
– Consumer response to price changes
Examine Competition Pricing
• Penetration Pricing
– Lower than competition pricing
– Stimulate demand
• Parity Pricing
– Equals competition pricing
• Premium Pricing
– Higher than competition pricing
– Signal quality
Summary
• Niche marketing is a competitive strategy
• Niche marketing equates to differentiated products
for target markets
• May be product and/or process specific
• Labeling and 3rd-party certification can help
• Requires knowledge of target consumer
• All product packaging, labeling, advertising, and
promotion must be target market centered
• Higher pricing and more rewarding customer
relationships