The Market
Business: BTEC Level 3 National Extended Diploma, topic 2.1.3
Niche vs. Mass Markets
Markets can be split into mass segments and niche segments. Their characteristics are different.
Mass market
- The mass market tries to make products and/or services for all consumers.
- The mass market will be larger and the types of products will be more generalised.
Niche market
- The niche market appeals to a much smaller segment.
- The niche market will be smaller than the mass market.
- The niche market provides products and/or services which focus on a specialist want or need.
Examples
- In the fast-food industry there are a few dominant players who appeal to the mass market - McDonalds, Burger King, Subway.
- There is a smaller niche market for healthy fast food. This is addressed by businesses such as Leon.
Benefits and disadvantages of mass markets
- Benefits:
- Having more customers.
- Benefitting from economies of scale (due to higher output levels).
- Can build a strong market presence.
- Disadvantages
- Higher levels of competition.
- Lower profit margins
Benefits and disadvantages of niche markets
- Benefits:
- Less competition.
- Specific market.
- Can develop specific expertise.
- Higher profit margins.
- Customer loyalty.
- Disadvantages:
- No economies of scale.
- Vulnerability because they have an undiverse product portfolio.
Brands
Brands can differentiate one business from a competitor. differentiate competitors. Strong brands can develop strong customer loyalty for a business, leading to larger profits.
What is a brand?
- A brand is a good or service that has something which is unique & recognisable. This could be from the way that the product is designed or a different feature.
- A brand is more likely to become strong if it is easily recognised and distinctive.
Strong brands
- Strong brands usually benefit from higher customer loyalty. Customers support the brand and will continue to go and buy their products repeatedly.
- A brand can create higher profitability by itself. Some consumers will pay higher prices for items with a certain brand logo on them (e.g. Nike or Apple).
Retailers
- Retailers try and stock well-known brands on their shelves.
- However, to try and boost profits, retailers are developing their "own-label' brands.
- These products undercut big brands by being cheaper but are more expensive than their basic products.
Test yourself on The Market
What are the two types of markets?
Which market segment appeals to all types of consumers?
In which market is a business more likely to gain economies of scale?
In which market is a business more likely to have less competition?
What can a strong brand lead to?