Niche and Mass Markets | Business

Summary

This video explains the difference between mass and niche markets using the example of potato crisps. Mass markets, like Walkers crisps, target a broad audience with products that appeal to general needs, focusing on high volume and low costs. In contrast, niche markets, exemplified by O'Donnell's gluten-free crisps, cater to specific customer needs, offering more specialized products at higher prices but with a smaller customer base. The video explores the advantages and challenges of both market types, highlighting how businesses can succeed by targeting large or specialized segments based on their unique strategies.

Takeaways

• 😀 Mass markets target a broad customer base with general products that fulfill less specific needs and wants.
• 😀 Walkers crisps is an example of a mass-market product, dominating over 55% of the UK crisp market.
• 😀 Mass-market products are often widely distributed and available in many outlets, from supermarkets to newsagents.
• 😀 In mass markets, having a well-recognized brand is essential for success, such as Walkers, McDonald's, or Heinz.
• 😀 Economies of scale play a crucial role in mass-market success by lowering unit costs and making large-scale production efficient.
• 😀 Niche markets target smaller, specialized customer segments with specific needs, often resulting in less competition.
• 😀 O'Donnell's gluten-free crisps serve as an example of a niche market, with limited availability and a specialized product.
• 😀 Niche markets allow businesses to charge higher prices due to product differentiation and cater to customers with specific wants.
• 😀 The main advantage of niche markets is the potential for higher profit margins through specialized products.
• 😀 Niche markets typically involve higher unit costs since the production scale is smaller, making economies of scale harder to achieve.
• 😀 Businesses in niche markets often benefit from customer loyalty due to their specialized offerings, even though they face smaller customer bases.

Q & A

What is the primary difference between niche and mass markets?

The primary difference between niche and mass markets lies in the size and specificity of the customer base. Mass markets target a broad audience with general needs, while niche markets cater to a smaller audience with more specific, often specialized needs.

How does Walkers crisps exemplify a mass market product?

Walkers crisps exemplify a mass market product because they are widely available across many outlets like supermarkets and newsagents. They have a broad customer base and offer a variety of flavors but essentially maintain a consistent product that appeals to a wide audience.

What is the market share of Walkers crisps in the UK?

Walkers holds over 55 percent of the UK market for crisps, making it a dominant player in the mass market for this product.

How does the distribution of O'Donnell's crisps differ from Walkers?

O'Donnell's crisps are part of a niche market and are not as widely distributed as Walkers. They are typically available in a few selected supermarkets and delicatessens, catering to a smaller, more specific audience with gluten-free preferences.

Why is it easier to achieve economies of scale in mass markets?

Economies of scale are easier to achieve in mass markets because the large volume of production allows for reduced unit costs. This is possible when the product targets a broad, less specific audience and is produced in large quantities.

What are the key advantages of targeting a mass market?

The key advantages of targeting a mass market include a wide customer base, potential for large sales, and the ability to leverage economies of scale to reduce unit costs, which can lead to higher profitability.

What are the disadvantages of targeting a mass market?

The disadvantages of targeting a mass market include increased competition from other large producers, a lack of product differentiation, and the challenge of meeting the diverse needs of a broad customer base.

What is a significant benefit of targeting a niche market?

A significant benefit of targeting a niche market is the potential for higher profit margins, as businesses can offer differentiated products that cater to specific customer needs, leading to more loyal customers.

What is the drawback of operating in a niche market?

The main drawback of operating in a niche market is the limited ability to benefit from economies of scale due to smaller production volumes. This can lead to higher unit costs compared to mass market operations.

What role does product differentiation play in niche markets?

Product differentiation plays a crucial role in niche markets because customers in these markets have more specific needs. By offering a unique product or service that addresses these needs, businesses can charge a higher price and enjoy greater customer loyalty.