Niche Marketing and the Importance of Product Differentiation

Transcription

1 Niche Marketing and the Importance of Product Differentiation Kynda R. Curtis, University of Nevada, Reno Stuart T. Nakamoto, University of Hawaii at Manoa

2 Overview Two competition strategies Niche marketing steps Product differentiation strategies Promotion and Pricing Producer payoff

3 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

4 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

5 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

6 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.

7 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

8 Example Niche Market Buyers, who are they? 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. 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

9 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

10 Product Specific Differentiation Strategies Observable Characteristics Sight, smell, touch, sound Experience Characteristics Taste, texture functionality (shelf life, maturity) Brands and labels Customer loyalty

11 Process Specific Differentiation Strategies Credence characteristics Production practices Production location Labeling and 3rd-party certification Marketing practices

12 Producer Payoff Studies show consumers willing to pay premiums for identified characteristics (labeling, promotion, 3rd-party certification) Food safety Specific nations/areas of origin Natural/organic/reduced chemical inputs Humane animal treatment Nutritional related factors (e.g. high antioxidant, low fat)

13 Market Outlets Where does your target market shop? Direct-to-Consumer (Direct Marketing) 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

14 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

15 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

16 Examine Competition Pricing Penetration Pricing Lower than competition pricing Stimulate demand Parity Pricing Equals competition pricing Premium Pricing Higher than competition pricing Signal quality

17 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