A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments.
In focusing strategy the key to success is choosing a market niche where buyers have distinctive preferences, special requirements, or unique needs and developing a unique ability to serve those needs.
Example Family Dollar, targets poor urban American families who can not drive to Wal-Marts in the suburbs because they do not own a car. Its is now a growing Fortune 400 Company.
Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too‘s".
HUL used a cost focus strategy in its Wheel detergent line, which it used to reach the price sensitive customers seeking affordable quality.
In the differentiation focus strategy, a business aims to differentiate within just one or a small number of target market segments.
The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers.
The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.
For Example, Ferrari and Rolls-Royce are classic examples of niche players in the automobile industry. Both these companies have a niche of premium products available at a premium price.
Focus allows businesses to compete on the basis of low cost, differentiation, and rapid response against much larger businesses with greater resources.
Focus lets a business learn its target customers- their needs, special considerations they want accommodated- and establish personal relationships in ways that differentiate the smaller firm or make it more valuable to the target customer
Low costs can be achieved filling niche needs in a buyer’s operations that larger rivals either do not want to bother with or cannot do as cost effectively
With enhanced knowledge of its customers and intricacies of their operations, the small, focused company builds up organizational knowledge about timing sensitive ways to work with a customer. This allows the firm to respond rapidly to customer requirements.