What Is A Niche Company?
A niche company is a business that focuses on a smaller market or offers a different type of service to other companies. For this reason it can identify consumer bases that either don’t appeal to larger companies or have not yet been discovered. By building its business model around these tenets it can avoid entering a market that is already saturated with competing products.
Niche doesn’t just refer to the business itself though. It can also refer to the strategy employed by a larger business in order to target a particular set of consumers. One advantage of a business employing a niche marketing strategy is that it can engage with its consumer base more frequently as it is much smaller and therefore easier to monitor. This means that policies, products and marketing strategies can be quickly altered to suit the needs of the consumer. In turn, this allows the company to position itself as an industry leader and a market expert.
What Is A Multi-National Corporation?
A multi-national corporation is any business that operates in more than one country. Usually the multi-national will maintain a headquarters in the country of its origin, but its other offices can vary in terms of autonomy. By proxy, multi-nationals are often worth far greater sums as consumer bases are much larger. As a multi-national grows, it will acquire other companies that become part of the corporation. These businesses are usually similar to those already owned by the multi-national as this enables it to aid this branch of the corporation with operating procedures.
How are the two linked?
Multi-nationals will continue to look to thriving niche companies for ideas on future strategies. Understanding niche markets is crucial to a multi-national, as it often highlights an area for potential growth that it has missed. There are many stories of multi-nationals who have ignored niche companies to their peril, such as Blockbuster laughing Netflix out of its office back in 2000 when it was suggested that its content should be moved online. Blockbuster was defunct by 2013 and last month it was reported that Netflix has 83 million subscribers around the world.
So can a multi-national also be niche?
The general consensus is that niche companies are easier to trust than multi-national organisations. A survey published by Statista in 2014 reported that only 17% of adults had a strong or very strong feeling of trust towards large companies compared to 66% for small companies. If a multi-national wants to go after a particular niche market, it is logical that the consumer base may be fairly suspicious of its motives. Similarly, any niche company bought out by a multi-national could lose what made it different in the first place (in marketing terms its “unique selling point” or USP).
There are several different ways in which a multi-national could be considered to be niche, and they are outlined here.
Buying a Niche Company
A multi-national can attempt to enter a niche market by acquiring a company which already has a niche consumer base. However, this strategy can often backfire. An example of this is when The Body Shop was bought by L’Oréal in 2006. Consumers felt that it had betrayed its previous ethical commitments and critics of the multi-national urged a boycott of its products.
However, being acquired by a larger organisation doesn’t have to spell the end of the brand in its current iteration. One of the most successful startup stories from the last few decades is that of Jo Malone, whose eponymous brand of candles and soaps was acquired by Estée Lauder in 1999 for “undisclosed millions”. Although Malone left the business in 2003, the brand has maintained the essence of what made it successful pre-acquisition and has never sought to dilute its consumer base by expanding beyond its target demographic.
But this practice is easier said than done. Part of the reason that the Jo Malone brand has been able to prosper is that it has always been marketed as high-end goods, and being bought by a large multi-national is not something that would intrinsically affect the perception of quality.
Adopting a Niche Marketing Strategy
A multi-national can also adopt the tactic of infiltrating niche markets itself by scaling down its marketing strategy. Chinese manufacturer Haier ventured into the US market by marketing its compact refrigerators to college students. Today the multi-national sells its product range in the USA and is recognised as the world’s largest brand for household appliances.
Carlsberg developed a series of niche brands looking to access new markets in Europe around 15 years ago, most notably with its Harnas brand of beer which was targeted towards the nightlife scene in Poland. The strategy enabled Carlsberg to challenge market leaders in a different area, as its better-known products would have had to compete in a saturated market. This is an excellent example of segmentation, wherein marketers look to break down a potential consumer base into different demographics in order to target products more effectively.
Huy Fong Foods is another multi-national which has effectively targeted a niche market. The branding of its products has been important, as the product still comes with the same design as when it was first produced, and this gives it a more personable feel, free from corporate planning. Similarly, its online presence looks to provide interesting content for its consumers such as recipes and user generated videos. Engaging with consumers is vital for any multi-national looking to target a niche market and maintain the perception that it is a niche company.
User generated content is one of the best ways for a multi-national to engage with its consumer base and appear niche online. In 2013 electronics manufacturer Belkin ran a successful campaign in conjunction with Lego in which people could upload images of their customised Lego phone case along with the hashtag #LEGOxBelkin. The campaign targeted a small demographic but generated large amounts of organic content and reflected well upon the brand.
Growing a Niche Company
Starting off as a small niche company and then looking to expand its reach is a lengthy, but effective, process. Over the years beer manufacturers have generally been expert exponents of niche products marketed to new or smaller audiences. The popularity of craft beer in recent years has helped to extoll the virtues of niche businesses, yet in amongst the bevy of products exist some that come from multi-nationals. One example is Sierra Nevada, originally a small brewery from California which now sells its products across the US and in the UK. Sierra Nevada’s success is evident as in 2014 its sales reached just under £150m. Crucially the product has remained largely the same over time and the company has continued its efforts to remain environmentally-friendly which has helped maintain a positive public image. Therefore Sierra Nevada is able to market its product to a niche demographic but on an international scale.
The factors that will ultimately determine the success of a multi-national attempting a niche strategy will depend on the congruency of the brand images. This makes it easier for a niche company which has grown into a multi-national to keep this perception. Similarly, a simpler way for a multi-national to adopt a niche marketing strategy is to create a niche brand which can be targeted towards a specific demographic.
All acquisitions of niche companies need to be carefully considered in terms of the effect it will have on the USP of the product and brand. Any multi-national with a reputation at odds with that of the niche company or strategy it is employing is inviting a potential backlash from its consumers.
Have you ever worked for a niche company or employed a niche marketing strategy? Was it successful? Please let us know in the comments section or get in touch via social media.