NICHE MARKET

1. Definition

A niche market is the subset of the market on which a specific product is

focusing; therefore the market niche defines the specific product features aimed at
satisfying specific market needs, as well as the price range, production quality and
the demographics that is intended to impact.

Every single product that is on sale can be defined by its niche market. As of
special note, the products aimed at a wide demographic audience, with the
resulting low price (due to price elasticity of demand), are said to belong to the
mainstream niche—in practice referred to only as mainstream or of high demand.
Narrower demographics lead to elevated prices due to the same principle. So to
speak, the Niche Market is the highly specialized market that tries to survive
among the competition from numerous super companies.

2. Why should you bother to establish a niche market?

Because of the great advantage of being alone there; other small businesses may
not be aware of your particular niche market, and large businesses won’t want to
before with it.

The trick to capitalizing on a niche market is to find or develop a niche market that
has customers who accessible , that is growing fast enough, and that is not owned
by one establishes vendor already.

3. What should we know before our company goes after a niche market?

Most companies, whether big or small, direct their marketing to select niche
audiences. Even the country's largest manufacturers target carefully pinpointed
market segments to maximize the effectiveness of their programs and often tackle
different niches for each product group. Hewlett-Packard, for example, markets all-
in-one machines that print, fax and scan to segments of the home office market,
while targeting larger businesses for higher-priced, single-function units.
Niche marketing can be extremely cost-effective. For instance, imagine you offer a
product or service that's just right for a select demographic or ethnic group in your
area, such as Hispanics or Asians. You could advertise on ethnic radio stations,
which have considerably lower rates than stations that program for broader
audiences. So your marketing budget would go a lot further, allowing you to
advertise with greater frequency or to use a more comprehensive media mix.

Example of niche market: Neutrogena Corporation

a. History of Neutrogena Corporation

An independent company until its 1994 acquisition by Johnson & Johnson,

Neutrogena Corporation manufactures and markets a line of premium-priced skin
and hair care products that are distributed in more than 70 countries. The company
is especially known for its innovative niche marketing and its leading product, the
clear, clean-smelling glycerin soap bar that established its role as a pioneer in the
skin care arena.

b.Company Foundations, 1930-60

Headquartered in Los Angeles, California, the company was founded by Emanuel

Stolaroff in 1930. In its early years, the company’s name was Natone, and its
function was to supply specialty cosmetics to beauty salons related to the
Hollywood film industry. Expansion began in the 1940s, when Natone spread its
manufacturing and distribution of cosmetics to the larger retail market.

A 1954 business trip to Europe inspired Stolaroff to follow a new product direction
that would chart the future course of Natone's operations. Belgian cosmetic
chemist Dr. Edmond Fromont had developed a new soap which rinsed quickly and
easily, leaving no soap residue. In fact, eleven minutes after washing with
Fromont's soap--just one minute longer than with pure water--a person's skin pH
would return to normal. This unique soap was called "Neutrogena." Believing that
Fromont's soap would be well received by the U.S. market, Stolaroff made
arrangements to import and distribute it in the United States. Early marketing plans
emphasized the soap's transparency and targeted department stores and drug stores
as sales venues.

Instrumental in the design of the first marketing strategies for the Neutrogena soap
was Lloyd Cotsen. A former archaeologist with a history degree from Princeton,
Cotsen married Stolaroff's daughter, Joanne Stolaroff, in 1953, and then went to
Harvard for his M.B.A. Beginning in 1957, he became an integral and personally
invested player in the family business (he retained ownership of approximately half
of Neutrogena's stock until the company's 1994 acquisition). In fact, Cotsen's
strategies made the soap such an important aspect of Natone's business that in 1962
the company name was officially changed to Neutrogena Corporation. In 1967
Cotsen became president of the company. Neutrogena's sales in that year were
approximately $3 million, with the major product being the glycerine soap.

c.Niche Marketing Strategy, 1960s

Soon after his presidency began, Cotsen created the niche marketing strategy that
would shape the success of Neutrogena for almost three decades. According to
Business Week, Cotsen's motto has always been: "I'm not that smart, and I don't
like competition." Priced midway between soaps like Ivory and Clinique, and
positioned between elite skin-care products and mundane toiletries, Neutrogena
was safe from competitive price wars waged by bigger companies for most of the
company's history. Cotsen kept credibility high and marketing costs low (12
percent of sales in 1981, as compared to 20 percent at Clinique) by promoting
Neutrogena soap through the cultivation of relationships with two institutions:
dermatologists and luxury hotels. Free samples left in dermatologists' offices and
repeated visits each year led to Neutrogena's unrivaled success in the soap market.
As of 1981, a dedicated force, comprising 16 out of 66 salespersons, was assigned
the sole responsibility of visiting 5,000 dermatologists each year, developing
personal relationships with advocates in the profession. Similarly, one-ounce bars
of Neutrogena were distributed to luxury hotels and resorts, where--Cotsen
theorized--businessmen's wives would be likely to see them. Cotsen insisted that
the mini-bars of Neutrogena retain the company name and logo, promoting name
recognition along with the soap's unmistakable look and smell.

Similarly, Cotsen targeted book-review readers rather than comics-readers as his

primary market, and shunned supermarket sales for years. Drugstores comprised
the primary sales venue, sideskirting the problem of competition with mass-
produced brands and stressing the high quality of the product. In 1966 Neutrogena
was one of eleven companies named in a lawsuit by two wholesale drug
companies, H. L. Moore Drug Exchange and Hyman Boxer, alleging that the
refusal of Neutrogena and other companies to sell to the plaintiffs led to the
elimination of price competition.

During the 1970s, the company began to explore marketing and research efforts to
expand its skin care product line. Promotions for Neutrogena's new acne cleansing
soap in teen publications offered a free trial-size bar. The ads proclaimed, "If you
have acne, we need your help," and Neutrogena asked teens to send a quarter (to
cover handling) and to give the company honest answers about the success of the
soap. Over 57,000 teenagers sent in their quarters, constituting the highest response
in the company's history, and a newly penetrated market. In 1973 the company
went public, with a market value of $11 million. By 1980, Neutrogena entered hair
care with a new product, and acne preparations soon followed.

Tragedy and controversy linked to the family business befell Neutrogena's

president, Lloyd Cotsen. In 1979, while Cotsen was in New York on a business
trip, his wife, son, and a young house guest were murdered in the family's Beverly
Hills home. An investigation by Beverly Hills police pointed to the guilt of the
Belgian businessman who had originally sold the Neutrogena rights to Emanuel
Stolaroff. Stolaroff and the Belgian rival were involved in litigation, and the police
contended that Lloyd Cotsen was the intended target of the murderer. The Belgian
committed suicide shortly before his scheduled interview by detectives, leaving the
crime unsolved. Cotsen remarried in 1981, to Jacqueline Brandwynne, a New York
consultant. In 1992 Brandwynne sued Cotsen for divorce and $1.5 million,
claiming that he had convinced her to quit her $150,000 a year job in New York on
the condition that she would be paid in an equivalent number of Neutrogena shares
each year. In return, she helped to formulate Neutrogena's success strategies.
According to Brandwynne, the Neutrogena shares never materialized during the
ten years of her marriage to Lloyd Cotsen.