What is a Niche Market?

Definition: A niche market is a focused and well-defined market segment that is served by only a few brands. A niche market is firstly defined when a company creates a product or service that might fit particular needs of just a portion of the broader consumer group.

What Does Niche Market Mean?

Firms demarcate niches by taking advantage of the wide range of preferences and consumer types that exist in a particular market. When competing in a broad market, especially if it is a mature one, companies generally face strong competition. By creating a niche market, businesses are capable to offer a product or service that meet certain unique characteristics that distinguish these sub-groups from the market as a whole. Since niches are small portions of the broader market, most of the big players are usually not interested in entering there.

These results in low competition and rivalry, at least while the niche is considered small. Such conditions often allow higher prices and stronger loyalty because consumers perceive that the brand fits their particular preferences and needs. Nevertheless, it is useful to know that markets are dynamic and tend to progress in both size and sophistication. What used to be a niche some decades ago might now be a broad market in the future.

Example

Ms. Nilda Brown created a niche in the vast and competitive food delivery service market. She offers the brand Nilda, which markets home-delivered meals for children suffering gluten and/or lactose intolerance. It targets working women that lack the time to prepare special menus for their allergic children.

Because of the extra time and effort required to prepare at least three special meals for their children every day, these women highly appreciate the service and have the will to pay for it. In addition to the convenience of home delivery, mothers also value that Nilda meals are high-quality products tested by nutrition experts. Although the niche is small, the company is rapidly growing thanks to the absence of competitors.