Download Factors affecting whether businesses m ting

Factors affecting whether businesses market their products at a wide or narrow market
A critical decision for many businesses is whether to aim for a narrow range of customers or a broad range. Both mass
marketing and niche marketing strategies can meet most of a business’ marketing objectives.
NICHE MARKETING
Niche marketing is an attractive proposition for small firms, as there may be little competition in the segment. However,
you do get many businesses involved in niche marketing which are actually
actually owned by, or are large divisions of, larger
organisations. It is not uncommon to have niche markets based on exclusive or high-quality
high quality products, or may be located
in more remote areas, where higher prices can be charged.
Advantages
Less competition – There may be fewer competitors as
larger companies may not be attracted to the relatively
smaller markets. Lack of competition means more
customers, which equals more profit
Costs – Smaller companies in niche markets don’t benefit
from economies of scale, which means there is no cost
reduction – which can put off the larger companies
Small-scale production – Limited demand may suit a
smaller business which doesn’t have the resources to
produce products on a larger scale
Tailor-made products – Niche businesses can adapt their
product to the needs of the niche market, rather than
compromise between the needs of many
any different groups
of consumers – this gives the products a USP and allows
the business to charge more
Targeting customers – It can be easier for businesses to
target customers and promote their products effectively
when they are only selling to a certain type of customer
Disadvantage
Disadvantages
Limited Demand – Lack of customers in the market can
lead to low profits
Higher unit costs – Consumers may be put off by the
higher selling prices that arisee due to not benefitting
from economies of scale and from job production
Attractive to competition – If the small bu
business does
well in the niche market, the larger companies may want
a piece of the action and steal your market
Changes in demand – Within such a specialist market,
fluctuating demand can cause issues: when it increases,
production may not be able to keep up; whe
when it
decreases, the business yields less revenues
No risk spreading – Larger companies can spread the
risks of failing products over their product mix – a small
niche business only has one or two products, so it
cannot spread the risk of one failing over the whole firm
Case Study: Winter Melon Tea
In order to compete against the imported drinks from mega-manufacturers
mega manufacturers such as Coca
Coca-Cola and the like,
local companies in countries such as Hong Kong and Singapore have started to retail traditional Asian drinks
sold in 33cl cans. Sales of these drinks began
began at such a low level, but are quickly rising. The consumers of these
drinks are led to believe, with the use of marketing, that their drinks (such as winter melon tea and grass jelly)
are a healthier option to their imported competitors’. Other firms use
use economic nationalism to sell their drinks
to the niche market, such as “Asian heritage” in their advertising. Unfortunately for these small Asian
companies, the multinationals have picked up on the sudden success and rising sales of these drinks, and in
response have launched their own lines of traditional drinks. This is an example of a me
me-too product (i.e. a
product which has success, and so other business want some too)
MASS MARKETING
Many mass market businesses began by setting up to appeal to niche markets, and grew from there. Other firms have
chosen to go straight into the mass market, but usually if this is the option they choose, they tend to begin in one
geographical area and progress upwards
rds from there. Mass market products aim to appeal to everyone, rather than a
single specific market segment.
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Advantages
Large-scale production – Whilst it may be expensive to
get the machinery up and running, the money soon
comes rolling in with heavy revenues due to mass
purchases from the wide market you appeal to
High revenues – The mass market opens you up to
basically all consumers, and as you benefit from
economies of scale, you can charge lower prices
No barriers to entry – As a larger company, there are no
barriers to entry in the mass market
R&D – Having high revenues generated means that you
can reinvest
invest money into research and development,
whereas niche markets avoid R&D due to its expense
Brand awareness – It is quicker and easier to target the
market considering it is essentially everyone – targeting
nationally or even globally
Disadvantage
Disadvantages
Fixed capital – The expenses of entering and running a
business within the mass market are quite great
Changes in demand – These affect the profits similarly
to niche market businesses, however, mass markets
cannot adapt to market changes as quickly as niche
Standardisation – The effects of standardisation soon
become clear if you have a standard product that
perhaps not everyone wants
Competition – There is almost always a lot more
competition, and usually bigger, tougher competition,
within the mass market
Adding value – This becomes a lot more difficult in the
mass market, for example, Tesco vs local stores
In order to compete in a mass market, businesses need to differentiate their products from their competitors’. If the
consumers value the difference in a business’ product, the firm will benefit in two ways:
1
2
Increased sales volume – the consumers clearly value the product, so brand loyalty will be established, and
many customers will be encouraged to buy your product
Greater scope for charging a higher price (associated with the USP system in the niche market) – this happens
when you make a mass market product
pro duct feel more like a niche market product, so you are able to charge the
consumers more for it
Product differentiation is achieved usually by employing elements of the marketing mix:



design, branding and packaging to improve the product attractiveness
clever
ver promotional and advertising campaigns to boost the brand image and sales
different distribution methods (e.g. AVON selling directly to consumer, “bringing it to you”)
Many mass market businesses achieve product differentiation via product proliferation.. This occurs when a wide
variety of products are produced to serve different tastes. In some cases, this might mean different products.
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