This article is an excerpt from the Shortform book guide to "How Brands Grow" by Byron Sharp. Shortform has the world's best summaries and analyses of books you should be reading.
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What is a niche marketing strategy? Why are they so popular, yet drive so many businesses to fail?
Niche marketing strategies aim to sell a company’s products to a very small and specific audience. However, Byron Sharp in his book How Brands Grow says that limiting your target audience can make you lose potential customers who aren’t a part of that specific group.
Let’s look at how niche marketing strategies work, and why it’s better to advertise to a larger demographic.
Market to Everyone, Never to a Niche Market
Sharp states that when modern marketers try to acquire new customers, they typically identify a target demographic and tailor their marketing toward it. Sharp challenges this niche marketing strategy, asserting that in most cases, it’s virtually impossible to boost your sales by tailoring your marketing to a specific demographic. On the contrary, targeting a niche is more likely to limit your reach. Instead, market to as many demographics as possible.
Misconception: Most Market Divisions Don’t Exist
According to Sharp, marketers use niche market strategies because they assume that markets are more divided than they really are. In other words, they assume that each product in a market appeals to a specific type of buyer, and marketers succeed by tailoring their marketing to that niche. For example, the marketers of a fruit smoothie bar may assume they’re selling to a young, health-conscious niche market while nearby ice cream stores sell to a separate market, one that’s more family-oriented and less health-conscious.
However, Sharp explains that using a niche marketing strategy fails because most competing brands have demographically identical customer bases. In other words, the same kinds of people buy products that marketers think appeal to mostly separate audiences. Consumers enjoy buying a wide variety of different products depending on how they feel at a given time.
For example, imagine a company that sells healthy frozen meals. Their marketers may assume that they’re selling in the niche “healthy instant meal” market, competing against other companies trying to sell healthy instant meals to a target demographic—perhaps busy parents who don’t have much time to cook but have an expendable income and want their kids to eat healthily.
However, Sharp would argue that our frozen meal company is operating in a mass market. Nearly everyone wants to buy a healthy frozen meal from time to time, even if it’s just once a year. Thus, our frozen meal company is not only competing with other healthy frozen meals, but all meal alternatives, including instant meals, restaurants, and meal delivery kits.
Sharp explains that marketers who suffer from the misguided assumption that they’re operating in a niche market set sales goals far too low. Falsely assuming that they’re “market leaders” of a specific niche, they don’t realize that they have the potential to convert customers from all the competitors in the mass market and become a top brand on a global scale. These marketers would earn more customers if they adjusted their marketing for a broader audience. Therefore, instead of targeting busy parents, our healthy frozen meal company should create marketing that appeals to everyone.
Niche Marketing Strategies in the Internet Age
Sharp claims that tailoring your marketing to appeal to a certain group has no effect (evidenced by the fact that competing brands have demographically identical customer bases). He also asserts that most products naturally appeal to a wide range of demographics, even if only occasionally. However, specialized products exist that likely wouldn’t benefit from mass marketing because they truly do only appeal to a certain demographic—for example, guitar straps will generally only be bought by people who play guitar. Any marketing that shows ads for guitar straps to non-guitar players is a waste of money. In this case, niche marketing strategies do have tangible benefits.
Furthermore, even though Sharp published How Brands Grow in 2010, at a time when Internet marketing was growing, he doesn’t acknowledge the Internet Age’s advances in targeted advertising that arguably make it a more viable strategy. Never before have advertisers who sell specialized products been able to ensure that only people who fit their desired customer profile see their ads, making these ads as cost-effective as possible (since people who’d never be interested in the product simply never see the ad). Now, the advertising platforms owned by companies like Facebook and Google make this kind of targeted advertising available to all brands.
On the other hand, it’s possible that the Internet’s advanced targeted marketing only exacerbates the problems for brands that Sharp identifies in How Brands Grow. If brands can now ensure that their ads are only viewed by a narrow demographic, potential customers who fall outside of that demographic may be even less likely to hear about the brand than they would have been in the age of traditional mass marketing. This could prevent brands from expanding beyond the niche they falsely believe themselves to be competing in.
For example, if a company that makes quality leather guitar straps targets their ads only to males from age 18 to 24 who play guitar, they may miss out on potential sales from other demographics: people who aren’t men, people who fall outside the 18 to 24 age range, or people who don’t play guitar but want to buy a gift for someone who plays guitar.
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Here's what you'll find in our full How Brands Grow summary :
- Why everything you know about marketing is wrong
- An unpacking of the unsubstantiated marketing myths that business schools teach
- The psychology behind consumers’ purchasing decisions