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MARKETING

In Praise of Niche Marketing
 

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The phrase "niche marketing" contains within itself both highly attractive and self-limiting qualities. It's easy to detect a whiff of condescension, whispering to us "Small, fragmented audiences are fine for small businesses with limited goals, but big and serious companies have their sights set on the mass market."

And there is a degree truth to that. Procter & Gamble has divested itself of smaller brands -- like Comet and Duncan Hines -- to focus on a higher-yield stable of brands with global appeal. Meanwhile, the big box retailers -- as well as supermarkets -- are reducing the number of brands they stock. If you're not a top three brand, you're not SKU-worthy.

For these reasons, I was both surprised and delighted to read recently that something like half of Amazon's book volume comes from puny items that show up on its sales rankings at 100,000 or below. Sure, it sells its share of New York Times best sellers and other blockbusters. But consider the thousands upon thousands of the obscure, the arcane, the forgotten -- all of which Amazon makes available to readers who refuse to have their tastes dialed into the most popular national frequency.

Simply put, what Amazon has done is aggregate many niches, and through that effort it has created a huge and successful mass business based on understanding and satisfying individual needs and tastes. It invested millions in inventory and an amazing sophisticated order-fulfillment apparatus to be able to offer and send me -- in one day -- a copy of Sanskrit Pronunciation (ranked 277,198). And Amazon has made it pay off.

Of course, Amazon has succeeded by filling a void, a hoary principle that still holds in the digital economy. While more books are being published than ever before, only a small fraction of them make it into the superstores that dominate the retail distribution topography. The warehouse clubs, who control an ever-increasing percentage of book sales, compress their offerings into an even more brutally edited inventory. This leaves many readers -- a significant number, apparently -- with no way to indulge their un-mainstreamed tastes, or even to wander and discover.

And it's a phenomenon that's not just relevant to books. Desperately unsatisfied consumers are looking to find their personal preferences met across the board: music, food, fashion, technology, even radio. In the last 10 years the audience for public radio has doubled, a soaring increase that I believe is due in large part to the homogenized mush that commercial radio pumps out.

The message of this is: don't be afraid of niches. Embrace them. Even more important, the Amazon example compels us to redefine the very definition of a niche. Due to the massive consolidation we're seeing at virtually every level of the economy -- huge openings in the marketplace, stirring opportunities in fact, are being created. And these are the kind of opportunities that are particularly open to entrepreneurial success, because they require the kind of consumer sensitivities and insights that the calcified giants continually prove themselves incapable of generating.

These "New Niches" are clearly a different path to the market than a single, "Big Bang" approach to market creation. But they make a ton of sense, given the reality of today's rapidly diversifying America, and the slow disappearance of mass-market demographics. As such, to build your business around a collection of well-positioned "Little Bangs" can lead you not only to success, but to creating your very own weapons of mass distraction.

Last updated: May 1, 2004




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