A level Business Revision - Niche & Mass Marketing

Summary

This video script explores the dichotomy between niche and mass marketing strategies, highlighting the process of market segmentation and the distinct approaches each strategy takes. It outlines the advantages and limitations of niche marketing, such as less competition, higher potential pricing, and vulnerability to customer loss, versus the broader reach, economies of scale, and intense competition associated with mass marketing. The script emphasizes there is no one-size-fits-all strategy and that niche markets can evolve into mass markets over time.

Takeaways

• 📊 Market Segmentation is the process of dividing a broad market into distinct groups based on characteristics or needs.
• 🔍 Mass Marketing involves targeting all or most market segments with a single or slightly varied product offering.
• 🎯 Niche Marketing focuses on a single market segment, providing specialized products or services to meet the specific needs of that group.
• 💪 Niche markets often have less competition due to their smaller size, which can be advantageous for smaller organizations.
• 💰 Niche marketers can charge a premium for their products because they cater precisely to the needs of their target audience.
• 💼 Higher unit costs in niche markets can deter price competition, making it easier for new businesses to enter the market.
• 📈 The growth potential in niche markets is limited due to the smaller customer base compared to mass markets.
• 📉 Niche businesses are more vulnerable to customer loss, as a reduction in demand can significantly impact a smaller customer base.
• 🌐 Mass marketing can lead to greater revenue streams due to the larger customer base and broader market reach.
• 🏭 Economies of scale can be achieved in mass markets, reducing unit costs and potentially increasing profit margins.
• 🔑 Building brand awareness is often easier in mass markets due to the larger audience and more widespread exposure.
• 🚧 High fixed costs and capital-intensive operations are common in mass markets, requiring significant initial investment.
• 🤝 Competition in mass markets is intense, with many organizations vying for market share, often including large, established players.
• 💼 Mass marketers may find it more challenging to charge higher prices due to the more standardized nature of their products and services.

Q & A

What is the main focus of the video script?

The video script focuses on explaining the concepts of Niche and Mass marketing, their differences, advantages, and limitations.

What is market segmentation?

Market segmentation is the process of dividing the total market into different groups or subcategories based on characteristics or needs that potential customers might have.

How does mass marketing differ from niche marketing in terms of targeting customers?

Mass marketing targets all or most market segments, offering a single product or service to a broad audience, while niche marketing focuses on a single market segment, tailoring products or services to meet the specific needs of that group.

What are the two main advantages of niche marketing in terms of competition?

Niche markets usually have less competition because they are smaller and tend not to attract large organizations, which can be advantageous for smaller businesses.

Why might a niche market business be able to charge a higher price for its products?

A niche market business can charge a higher price because it caters specifically to the needs and desires of a particular group, adding more value to the products or services offered.

What is one potential downside of niche marketing in terms of growth potential?

The growth potential in niche markets is limited because they cater to a specific group of customers, which is inherently smaller than the overall market.

How can higher unit costs in niche markets be advantageous for small businesses?

Higher unit costs in niche markets can be advantageous because they often mean less price competition, making it easier for smaller businesses to enter the market without having to compete with low-cost producers.

What is one of the main benefits of mass marketing in terms of revenue potential?

Mass marketing can benefit from greater revenue streams due to targeting multiple market segments, leading to more sales and a broader customer base.

How might economies of scale benefit a mass market business?

Economies of scale allow a mass market business to purchase materials in bulk and produce at a lower cost per unit, which can lead to higher profit margins.

What could be a potential disadvantage of mass marketing in terms of competition?

In mass markets, businesses may face a greater number of competitors, including larger and more dominant players, making it more challenging to gain market share.

Can niche markets evolve into mass markets? If so, how?

Yes, niche markets can evolve into mass markets if they gain broader popularity and appeal, such as when a niche product like sugar-free items becomes mainstream due to changing consumer perceptions and values.

Outlines

00:00

📈 Market Segmentation and Strategies

This paragraph introduces the concepts of niche and mass marketing, explaining the process of market segmentation where customers are divided into groups based on characteristics or needs. It contrasts mass marketing, which targets all or most segments with a single product, with niche marketing, which focuses on a specific segment. The paragraph also outlines the advantages of niche marketing, such as less competition and the ability to charge higher prices due to tailored offerings, and discusses the limitations, including higher unit costs and a smaller customer base.

05:03

🚀 Advantages and Limitations of Niche Marketing

This section delves deeper into the benefits of niche marketing, such as reduced competition and the potential to add more value to products, allowing for higher pricing. It also highlights the barriers to entry being lower due to less price competition. However, it points out the limitations of niche markets, such as limited growth potential and vulnerability to loss of custom, which can be critical for businesses operating in niche markets due to their smaller customer base.

10:03

🌐 Exploring Mass Marketing Benefits and Challenges

The final paragraph discusses the benefits of mass marketing, including the potential for greater revenue due to a larger customer base and the possibility of achieving economies of scale. It also touches on the ease of building brand awareness in mass markets. Conversely, it acknowledges the challenges, such as higher fixed costs, intense competition with larger firms, and the difficulty of charging premium prices due to more standardized products. The paragraph concludes by noting that there is no one-size-fits-all strategy and that niche markets can evolve into mass markets over time.

Keywords

💡Niche Marketing

Niche marketing is a targeted approach where businesses focus on a specific segment of the market with specialized needs or interests. In the video, it is defined as zeroing in on one market segment after segmentation and tailoring products to cater to that group's needs. An example given is targeting high socioeconomic groups in the clothing market, offering products that meet their unique desires.

💡Mass Marketing

Mass marketing refers to a strategy where a company aims to appeal to a broad audience, attempting to satisfy the needs of all or most market segments. The script explains that even after identifying different needs across various groups, a mass marketing approach still tries to target everyone with a single or slightly varied product offering, as opposed to niche marketing.

💡Market Segmentation

Market segmentation is the process of dividing a broad market into distinct groups of consumers with similar needs, characteristics, or behaviors. The video script uses this concept to explain how both niche and mass marketing strategies begin with identifying different consumer groups but differ in how they target these groups afterward.

💡Competition

In the context of the video, competition refers to the rivalry among businesses within the same market. Niche markets are said to have less competition because they are smaller and less attractive to larger competitors, whereas mass markets have more competitors due to the broader audience and higher stakes.

💡Economies of Scale

Economies of scale are the cost advantages that an organization obtains due to its scale of operation. The script mentions that mass marketing can benefit from economies of scale due to larger production volumes, which can lower the per-unit cost, while niche markets may have higher unit costs due to smaller production runs.

💡Brand Awareness

Brand awareness is the extent to which consumers are familiar with a brand. The video suggests that mass markets might facilitate greater brand awareness due to the larger customer base and higher exposure, making it easier for businesses to establish a reputation and recognition.

💡Growth Potential

Growth potential refers to the capacity for a business or market to expand. The script contrasts the growth potential of niche markets, which is limited due to targeting a specific segment, with mass markets, which have a broader customer base and thus greater potential for growth.

💡Custom

Custom in the video refers to the patronage or business received from customers. It is noted that niche markets are more vulnerable to losses in custom, as they have fewer customers to begin with, making any reduction in demand potentially critical for the business's sustainability.

💡Fixed Costs

Fixed costs are expenses that do not change with the level of output or sales. The script points out that mass markets may involve higher fixed costs due to the need for larger-scale production capabilities, which can require significant capital investment in machinery and equipment.

💡Added Value

Added value refers to the additional worth or utility provided to a product or service beyond its basic function. The video explains that niche marketing can potentially offer higher added value, allowing for higher prices, because it caters precisely to the needs and desires of a specific market segment.

💡Barriers to Entry

Barriers to entry are obstacles that prevent new firms from entering a market. The script suggests that niche markets have lower barriers to entry due to less competition and higher unit costs, which can deter larger firms and make it easier for smaller businesses to establish themselves.

Highlights

Niche and mass marketing are two distinct approaches to market segmentation.

Market segmentation involves breaking down potential customers into groups based on shared characteristics or needs.

Mass marketing targets all or most market segments with a single or slightly varied product offering.

Niche marketing focuses on a single market segment, tailoring products to meet the specific needs of that group.

In niche markets, there is typically less competition due to the smaller market size attracting fewer competitors.

Niche marketing allows for higher prices due to the precise targeting of customer needs, adding more value.

Higher unit costs in niche markets can deter price competition, making it easier for small businesses to enter.

The growth potential in niche markets is limited due to the focus on a single customer category.

Niche markets are more vulnerable to loss of custom due to a smaller customer base.

Mass marketing can lead to greater revenue streams due to targeting multiple market segments.

Economies of scale can be leveraged in mass markets, reducing unit costs.

Brand awareness is often easier to build in mass markets due to greater exposure and customer reach.

Mass marketing may require higher fixed costs and capital investment in machinery and equipment.

Competition in mass markets is fiercer with a greater number of larger competitors.

Mass markets may limit the ability to charge higher prices due to more standardized products.

Niche markets can evolve into mass markets as consumer perceptions and values change over time.

The choice between niche and mass marketing strategies depends on organizational size, resources, and market conditions.

Transcripts

[Music]

in this video we're going to take a look

at Niche and mass marketing

distinguishing between the two

approaches and we're also going to try

and have a sneaky peek at some of the

advantages and limitations to each of

these different strategies to understand

the distinction between the two it's

worth taking a look at our old friend

Market segmentation and if you remember

when we segment the market we take the

total customers that we might reasonably

expect to be purchasing this product and

we try to break them down into different

groups or subcategories depending on a a

characteristic or a need that people

might have so it may be that in a market

males have different needs to females

people of different age categories have

different needs or tastes or wants from

each other maybe people in different

geographic regions need different things

people in different socioeconomic groups

might be looking for something slightly

different from this product to each

other and with mass marketing once we've

completed that segmentation process we

adopt a mass marketing strategy it means

that we still try to launch products to

Target all or most of those different

market segments so if we were conducting

some Market segmentation in the

Cosmetics Market we might note that

teenage Cosmetics customers have very

different needs to those in their 20s to

those who are middle age and those that

are in older age categories if we adopt

a mass marketing strategy it means that

we I we recognize that customers of

different ages do have different needs

but we still want to Target all of them

now that might mean that we need to

offer a tweaked variant of our products

to hit the needs of those different age

groups but with mass marketing we're

still trying to Target all of the

categories that we've ident identified

Niche marketing strategy is different

it's where you segment the market and

then decide to zero in to really focus

on just one of those market segments so

we might have segmented a market

according to income for example let's

imagine it's the clothing market and

we've worked out that people in

different socioeconomic groups have

different needs and wants and desires

when it comes to the purchasing of

clothing now we recognize those

different income groups and we recognize

those different needs but rather than

trying to launch ranges of clothing that

appeal to all of those different groups

with a niche marketing strategy we

decide to zero in on just one and really

try and cater for that need with the

products that we develop so it might be

that we decide to go with a niche

marketing strategy just targeting people

with clothing who are in very high

socioeconomic groups and it might be

that we can hit their needs with the

products that we offer because we're

just focusing in on that one group so

let's start with Niche marketing we'll

discuss some of the uh the advantages of

it first of all and Advantage number one

is to do with the competition that you

might face in Niche markets and there's

two things that we can perhaps say about

that first of all in Niche markets

you're likely to face less competition

because Niche markets are

smaller it draws less comp competitors

into that Marketplace so you're not up

against as many rivals but also the

rivals that you are up against May well

be smaller in stature because Niche

markets are by Nature smaller than Mass

markets they tend not to attract the

larger organizations to compete in that

market so that's two pluses especially

if you're a smaller organization fewer

competitors and the stature of those

competitors may be smaller as well

another advantage of the niche marketing

strategy is because you are hitting

customers needs exactly because you are

really focusing on just one Niche and

you can really learn about that consumer

and understand their needs and really

cater for their taste and their desires

you might be able to add more value and

charge a higher price for what you sell

so that can be really advantageous

because these are smaller markets but if

you can command a higher price in that

market then it just allows you an extra

Avenue

of creating

Revenue perhaps

another Advantage uh and this is going

to sound like a strange Advantage uh

because normally we associate High unit

costs with something organizations

aren't keen on something that's

disadvantageous to them but in Niche

markets because unit costs tend to be

higher because firms are not operating

on as large as scale because the markets

are smaller the potential for the

economies of scale are not as great

because those unit costs are higher it

tends to mean that firms aren't

competing with each other on price so

that lowers the barriers to entry in

Niche markets it can be easier for

smaller businesses to set up because

often in Niche markets there isn't any

firm that is a lowcost producer in that

market which might make it easier for

new entrance to join that market that's

great for the new entrance and smaller

organizations that are looking for a

market that they can more easily set up

in now if we talk about some of the

downsides some of the limitations of our

Niche marketing strategy obviously the

first is the scope or the potential for

growth so because Niche markets are

really just about one category of

customer one group that's been

identified it's going to be a set number

of people it's not going to be as large

as the number of people that are in the

market as a whole so the potential for

growth there is not as great and as a

linkage to that we can also say that the

potential for higher profits are not as

great either because there's not as many

customers for you to Target for example

rather than just being a mass producer

of kitchen wear if you decide to zero in

on the niche market of left-handed

people who desire kitchen wear there is

a finite number of those people and it's

not anywhere near as great as the total

size in that market so the potential for

profits are lower and the final

disadvantage we can perhaps talk about

is that in Niche markets you are more

vulnerable to any loss or reduction of

custom so a loss of custom is never

great to any organization but if you're

in a mass Market you're naturally going

to have more customers that that are

trade with your

business and you're going to have more

potential customers that you can Target

so if in a mass Market you were to lose

5% of your

customers that is obviously not ideal

but it might might be something that you

can absorb something that you can cope

with but in a niche market any reduction

in custom can be very very critical for

your organization because you don't have

many customers to begin with so if

you're operating in a niche market and

you have a 5% drop in demand that could

be enough to drive you out of the

marketplace to make your business

unsustainable so any loss in custom will

be more fiercely felt when you're

operating in a niche market now if we

have a little look at Mass marketing

strategies they have different benefits

and advantages if we start with the

benefits of mass marketing obviously the

fact that these markets are bigger

there's more people in them you've got

more market segments that you're trying

to Target means that you can potentially

benefit from greater revenue streams so

you're creating more sales more revenue

for your organization because you're not

just targeting One Market segment you've

segmented the market and you're trying

to offer something to all the segments

you identified going hand inand with

that is because you're operating on that

larger scale it may be that you benefit

from the greater economies of scale so

just because in the clothing Market

you've identified that males want

something different to females you still

might be able to purchase some of the

materials you use to manufacture your

clothing in Greater quantities imagine

you're manufacturing jeans and males

females want something slightly

different to each other they want

different styles and cuts but purchasing

denim you can still do in bulk and

benefit from economies of scale and then

you can craft and create different

styles of genes to Target those two

different market segments with other

Advantage we can say is it might be

slightly easier to build up Greater

brand awareness in Mass markets because

there's more customers because there is

more exposure and because we might be

selling on a larger scale it might just

make developing a brand awareness and a

reputation for a certain aspect of

marketing might just be easier to build

that up in in the mass markets than it

is in the less exposed Niche markets but

if we tick off some of our downside of

mass marketing we'll see you know it's

not all giggles and tickles in there

first of all the fixed costs in Mass

markets can be higher so if you want to

uh enter a mass Market there can be

quite High startup costs if you are

producing on larger scales and if you

are trying to produce more standardized

products it may mean that you're a very

Capital intensive organization you've

got to invest in lots of expensive

Machinery or equipment or it and that

obviously comes at a cost and so the

fixed cost of your organization can be

higher the break even outputs of your

organization can be higher as well in

kind of opposite to the niche markets we

can also talk about competition in Mass

markets and we can go for those two

factors again but in Reverse this time

so in the mass markets you're going to

face a greater number of competitors

because you're trying to Target more

than one market segment so you've got

more people more firms more

organizations that are crowding out your

Marketplace trying to saturate it and so

there's more competitors in each of

those markets but crucially the size of

those competitors might be greater than

in Niche markets as well so you're going

going to be up against other Mass

marketing organizations who are all

scrapping for market share in this Mass

Market that might be some very large

very dominant players in this market

that you are trying to compete with

finally we could also say that maybe in

those Mass markets there's less scope

for charging higher prices and having

greater added value because while you're

producing maybe slightly more

standardized and you're less likely to

be really hitting the needs of the

different market segments that you've

identified you might not be able to

charge as high a price as firms in a

niche market can and so it might just

reduce the amount of value that you can

add on each of the products that you

sell now there's absolutely no right or

wrong strategy Niche and mass marketing

strategies are both fine ways to go

Niche marketing strategies tend to be

more popular with smaller organizations

because of the smaller startup costs and

the lower barriers to entry those Mass

markets are often populated by larger

organizations who can afford the higher

fixed Capital costs of penetrating those

markets and can uh already start to

benefit from those greater economies of

scale by operating on a larger output

one thing we should also say is that uh

Niche markets can actually evolve into

Mass markets if they start to develop a

greater popularity so it may well be

that uh perhaps a niche market of old

like sugarfree products which might have

started out as a niche market just

targeting people like diabetics for

example as people have uh have changed

their thoughts their perceptions their

values their opinions as people have

become more health conscious as years

have gone by that's a niche market

that's taken on perhaps more of a mass

marketing appeal and so a business that

may have found itself in that niche

market might find itself naturally

evolving to Mass market organization so

there you go difference between Niche

and mass key thing to revise for the

exam good to know some of our different

advantages and disadvantages of each

approach to marketing good luck with

your revision we're going to put a link

up there to some other marketing topics

that may just Aid you as you're revising

great luck to you in your exam we'll see

you soon for some more tutorials