(Interview with Prof. Rey Lugtu by Ernesto Calucag, Senior Researcher, BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)
Many entrepreneurs think that selling to the widest possible market is the likeliest path to success. But given the cutthroat competition that prevails in today’s business environment, the “take all comers” approach has not been very effective, most especially for small businesses competing headon with the bigger players.
Thus, one exceptional business strategy has emerged, and that is for small businesses establishing themselves in a niche market. Because no matter how hard they try, no large company can be all things to all people. There will always be segments of the population whose needs for particular products and services are going to be unmet — leaving room for small businesses to succeed by meeting those needs.
A niche, in marketing terminology, is a small market consisting of an individual customer or a small group of customers with similar characteristics or needs. It could be similar interests, hobbies, age group, gender, social background, ethnicity, religion, lifestyle, and educational background, among others.
“Market segments are large identifiable groups within a market, such as the rich segment, the middle class segment, and the masa segment,” said Reynaldo Lugtu, Jr., marketing professor at De La Salle University Professional Schools. “A niche, in contrast, is a more narrowly defined group within the segment, which may seek a special combination of benefits, such as the class AAA niche within the rich segment, for jaguar cars or upscale condominium markets,” he explained.
Niche marketing is, therefore, targeting this small market that is not being readily served by mainstream products or services. A niche product could be a totally unique offering or a variation of a common product that is not produced and marketed by main marketing firms. And while there are many niche possibilities to explore, Mr. Lugtu noted that local companies, similar to pursuing a market segment, are still guided by the market feasibility rules of profitability, growth potential and sustainability.
Jose Jesus Roces, marketing guru from the Asian Institute of Management, added that niche marketing could also be described as “looking for that special place where you can leverage your competencies in a very competitive situation.” That is, as a strategy, niche marketing is all about positioning, until a firm finds itself valuable to a significant number of its clients.
Mr. Roces said that contrary to common notion, niche marketing is not exclusive to small companies. The bigger market players also exercise the strategy, as a way to widen their revenue base.
“Everyone should develop their niches, whether big or small. The ‘big company, big spender’ attitude is not a common trait these days,” he said.
An example is Johnson & Johnson which has more that 170 affiliates or business units that pursue niche markets — from diabetes care products to eye-care products. Another example is the offering of Smart Communications, Inc. called Smart Link that provides communication services to Filipino seafarers.
Mr. Lugtu explained that these big firms utilize what is called a “market or top-down approach” where a large market is broken down into smaller pieces or segments.
Many entrepreneurs think that selling to the widest possible market is the likeliest path to success. But given the cutthroat competition that prevails in today’s business environment, the “take all comers” approach has not been very effective, most especially for small businesses competing headon with the bigger players.
Thus, one exceptional business strategy has emerged, and that is for small businesses establishing themselves in a niche market. Because no matter how hard they try, no large company can be all things to all people. There will always be segments of the population whose needs for particular products and services are going to be unmet — leaving room for small businesses to succeed by meeting those needs.
A niche, in marketing terminology, is a small market consisting of an individual customer or a small group of customers with similar characteristics or needs. It could be similar interests, hobbies, age group, gender, social background, ethnicity, religion, lifestyle, and educational background, among others.
“Market segments are large identifiable groups within a market, such as the rich segment, the middle class segment, and the masa segment,” said Reynaldo Lugtu, Jr., marketing professor at De La Salle University Professional Schools. “A niche, in contrast, is a more narrowly defined group within the segment, which may seek a special combination of benefits, such as the class AAA niche within the rich segment, for jaguar cars or upscale condominium markets,” he explained.
Niche marketing is, therefore, targeting this small market that is not being readily served by mainstream products or services. A niche product could be a totally unique offering or a variation of a common product that is not produced and marketed by main marketing firms. And while there are many niche possibilities to explore, Mr. Lugtu noted that local companies, similar to pursuing a market segment, are still guided by the market feasibility rules of profitability, growth potential and sustainability.
Jose Jesus Roces, marketing guru from the Asian Institute of Management, added that niche marketing could also be described as “looking for that special place where you can leverage your competencies in a very competitive situation.” That is, as a strategy, niche marketing is all about positioning, until a firm finds itself valuable to a significant number of its clients.
Mr. Roces said that contrary to common notion, niche marketing is not exclusive to small companies. The bigger market players also exercise the strategy, as a way to widen their revenue base.
“Everyone should develop their niches, whether big or small. The ‘big company, big spender’ attitude is not a common trait these days,” he said.
An example is Johnson & Johnson which has more that 170 affiliates or business units that pursue niche markets — from diabetes care products to eye-care products. Another example is the offering of Smart Communications, Inc. called Smart Link that provides communication services to Filipino seafarers.
Mr. Lugtu explained that these big firms utilize what is called a “market or top-down approach” where a large market is broken down into smaller pieces or segments.
The segments are further broken down into niches that are defined by a specific group of people or consumers, and then the company finds a product or service to address the specific needs of this niche.
Another method is the “product or bottom-up approach” where the marketer starts from the needs of a few customers, produces the specialized product, and gradually builds up a larger customer base.
Mr. Lugtu mentioned that a prime example of this approach is the entry of virgin coconut oil, which started to address the desire of consumers for a natural and effective way of promoting health and treating illness. The product has grown such that it is now a multimillion dollar industry here and abroad.
Local beverage companies also used the same concept when they launched flavored water and blended colas, a growing niche product intended for young and sports-savvy customers.
SUCCESSFUL NICHE MARKETERS
In a crowded marketplace of health care practice, Intercare Healthcare Systems, Inc. successfully found a niche when it decided to offer a unified integrated approach towards health care.
Combining the best of what both traditional and alternative health care methods have to offer, Intercare’s winning niche is its treatment programs that are “complete, comprehensive, powerful and effective.”
Intercare is a health, wellness, fitness, and vitality center. Aside from its holistic wellness programs, the company’s team of clinicians further allow it to maintain a significant and growing number of clients in its niche market. It is quite known as an authority in chiropractic medicine in the country.
One of its founders and clinicians is Martin Camara, an internationally known chiropractic specialist, who regularly gets invited to major sports events, such as the Olympics and Asian Games.
Notably, Mr. Camara was the only Asian to serve at the last Winter Olympics in Torino, Italy.
Intercare’s team of clinicians also includes experts in acupuncture, rehabilitative medicine, and stress management.
In the property sector, Phinma Property Holdings is considered a niche developer, as it concentrates in making affordable medium- rise housing in the capital.
Grant Orbeta, Associate Vice- President for marketing and design at Phinma, said niche marketing is built in the product line itself.
“I believe no other developer that comes close to us as far as pricing is concerned. So we really don’t have to do any extra effort as far as niche marketing is concerned because it’s inherent in our business plan,” Mr. Orbeta said.
To maintain its niche market, the company targets a specific income level and from this, develops its own buyers profile, its main tool in growing its potential market.
“We have a buyers profile all the way back to our projects in 1996. We keep maintaining that and we try to monitor trends on buyers’ income, civil status, size of the family, where they originally resided and what made them decide to buy that particular property,” he added.
Another method is the “product or bottom-up approach” where the marketer starts from the needs of a few customers, produces the specialized product, and gradually builds up a larger customer base.
Mr. Lugtu mentioned that a prime example of this approach is the entry of virgin coconut oil, which started to address the desire of consumers for a natural and effective way of promoting health and treating illness. The product has grown such that it is now a multimillion dollar industry here and abroad.
Local beverage companies also used the same concept when they launched flavored water and blended colas, a growing niche product intended for young and sports-savvy customers.
SUCCESSFUL NICHE MARKETERS
In a crowded marketplace of health care practice, Intercare Healthcare Systems, Inc. successfully found a niche when it decided to offer a unified integrated approach towards health care.
Combining the best of what both traditional and alternative health care methods have to offer, Intercare’s winning niche is its treatment programs that are “complete, comprehensive, powerful and effective.”
Intercare is a health, wellness, fitness, and vitality center. Aside from its holistic wellness programs, the company’s team of clinicians further allow it to maintain a significant and growing number of clients in its niche market. It is quite known as an authority in chiropractic medicine in the country.
One of its founders and clinicians is Martin Camara, an internationally known chiropractic specialist, who regularly gets invited to major sports events, such as the Olympics and Asian Games.
Notably, Mr. Camara was the only Asian to serve at the last Winter Olympics in Torino, Italy.
Intercare’s team of clinicians also includes experts in acupuncture, rehabilitative medicine, and stress management.
In the property sector, Phinma Property Holdings is considered a niche developer, as it concentrates in making affordable medium- rise housing in the capital.
Grant Orbeta, Associate Vice- President for marketing and design at Phinma, said niche marketing is built in the product line itself.
“I believe no other developer that comes close to us as far as pricing is concerned. So we really don’t have to do any extra effort as far as niche marketing is concerned because it’s inherent in our business plan,” Mr. Orbeta said.
To maintain its niche market, the company targets a specific income level and from this, develops its own buyers profile, its main tool in growing its potential market.
“We have a buyers profile all the way back to our projects in 1996. We keep maintaining that and we try to monitor trends on buyers’ income, civil status, size of the family, where they originally resided and what made them decide to buy that particular property,” he added.
Comments
I have this report on market segmentation and I was asked to give examples at each level (segment, niche, local, and individual marketing). I'm currently having a hard time looking for examples here in the Philippine market. I hope Mr. Lugtu can help me. Thank You!
I have this report about market segmentation and I was asked to give an example at each level (segment, niche, local, and individual marketing). The examples must be Philippine-based. I hope Mr. Lugtu can help me. Thanks!