Marketing Intelligence & Planning

Niche marketing research: status and challenges

Kjell Toften Trond Hammervoll
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Kjell Toften Trond Hammervoll, (2013),"Niche marketing research: status and challenges", Marketing
Intelligence & Planning, Vol. 31 Iss 3 pp. 272 - 285
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Received 8 May 2012
Revised 30 August 2012
Accepted 10 October 2012
Marketing Intelligence & Planning
Vol. 31 No. 3, 2013
pp. 272-285
r Emerald Group Publishing Limited
0263-4503
DOI 10.1108/02634501311324618
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-4503.htm
Niche marketing research:
status and challenges
Kjell Toften
Andøya Rocket Range, Andenes, Norway, and
Trond Hammervoll
Harstad University College, Harstad, Norway
Abstract
Purpose – The purpose of this paper is to present a concise status of niche marketing research and
thereby provide a basis for further scholarly enhancement and insights for practitioners.
Design/methodology/approach – This paper takes the form of a literature review.
Findings – Reasons for why and when to pursue niche marketing, key success factors for implementing
niche marketing and the potential problem areas are identified. Avenues for advancing knowledge
about niche marketing are discussed.
Research limitations/implications – Practitioners benefit from this comprehensive review of
findings and insights from previous research. Scholars benefit from this review, as it summarizes and
identifies key areas for future niche marketing research.
Originality/value – There has be no known scholarly article assessing the status of niche marketing
research since Dalgic and Leeuw’s seminal work.
Keywords Niche marketing, Segmentation, Marketing strategy, Market segmentation
Paper type Literature review
Introduction
Niche marketing is a popular concept among academics and practitioners and is
commonly accepted as an important tool in the marketer’s toolbox today. Indeed, niche
marketing has been applied to a variety of industries, products and services over the
last couple of decades, such as food products (Tregear, 2003; Suryanata, 2000; Tamagnini
and Tregear, 1998); wine and beer (Jarvis and Goodman, 2005; Swaminathan, 1995;
Saperstein, 1994); retailing (Ashworth et al., 2006; Heim and Sinha, 2005; Azuma and
Fernie, 2001); tourism (Trunfio et al., 2006; Raynor and Weinberg, 2004; MacKay et al.,
2002); airline travel (McKechnie et al., 2007; Raynor and Weinberg, 2004; Olson and
Slater, 1996); fashion, textile and apparel (Parrish et al., 2004, 2006a, b; Doeringer and
Crean, 2006); banking (Cocheo, 2010; Dusuki and Abdullah, 2007); accounting services
(Lowry and Wrege, 1996); health services (Reichman, 2005; Volz, 1999); chemical
industry (Guisinger and Ghorashi, 2004); and metropolitan regions (Filion et al., 2004).
However, there is no widely accepted theoretical basis for niche marketing, and
there are multiple approaches to niche marketing and its operationalization. Applied
definitions are, however, often based on versions of Dalgic and Leeuw’s (1994) (p. 42)
definition: “positioning into small, profitable homogeneous market segments [y]
ignored or neglected by others.” It should be noted that niche marketing is related to
concepts in other literatures on strategy, target marketing and differentiation. For
instance, Porter’s (1980, 1985) focus strategy, part of three generic strategies, is
generally described as a concentrated attention on a narrow piece of the total market
The authors would like to thank two anonymous reviewers for their valuable comments and
suggestions.
 and the serving of this target market niche at a lower cost. Alternatively, it can be Niche marketing
described as appealing to the unique preferences and needs of a narrow, well-defined research
group of buyers better than potential rivals (e.g. Thompson et al., 2010). In addition, the
process of segmenting, targeting and positioning efforts (or the STP process) at the SBU-
level is often enforced as the core in marketing strategy literature (Webster, 2005). Finally,
segmentation is generally defined as the process of dividing large, heterogeneous
markets into smaller segments that can be reached more efficiently and effectively with 273
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products and services that match their unique needs (Kotler, 2010). At a fundamental
level, it remains unclear whether niche marketing is a generic strategy, an applied
marketing strategy or an extreme case of a marketing segmentation strategy.
In addition, the actual (positive or negative) outcomes and managerial implications
of niche marketing remain unclear. It has been claimed, however, that increasing
diversity in consumer tastes and habits and the changing needs of business and
organizational markets are likely to favor firms that can better tailor their offerings to
this fragmented market (Dalgic, 1998; Dalgic and Leeuw, 1994). The essence of this
thinking is that niche marketing enables customer needs to be better matched, and as a
result, the niche marketer can charge a substantial mark-up over costs because of the
added value. In other words, niche marketing is assumed to provide high margins,
while mass marketing is believed to provide high volumes (Kotler, 1989). Few empirical
studies have addressed such outcomes and implications of niche marketing, but one
such study is provided by Linneman and Stanton (1991) who found that niche
marketing strategy is profitable. For practitioners, however, it is vital to know whether
using niche marketing is beneficial, in what situations niche marketing should be used,
how niche marketing should be used and what awareness is needed to avoid pitfalls.
In sum, there are various approaches to niche marketing, but there has been
no comprehensive and systematized review of niche marketing research since the work
by Dalgic and Leeuw (1994). This lack of current and clear research-based
recommendations for practitioners hampers an effective use of the concept of niche
marketing and reduces the possibility of reaping any of the benefits of niche marketing.
In light of these concerns, the purpose of this paper is to present a concise status of
niche marketing through a review of recent niche marketing research and thereby
provide a basis for further scholarly studies and insights to be used by practitioners.
The remaining part of this paper is organized as follows: we first outline the scope and
analytical approach of this review, then the findings are presented in terms of identified
research approaches, reasons why firms initiate niche marketing, the benefits and success
criteria of niche marketing, the settings in which niche marketing is applied and the
identification of potential problems in using niche marketing. Then a discussion of the
findings is offered followed by a suggested definition of niche marketing. Finally, this
paper will provide recommendations for practitioners and for further scholarly research.

Scope and analytical approach

This review targeted academic papers dating back to 1994. The first step was a search
in August 2011 within the ABI Inform database for “niche market/marketing/strategy
and focussed marketing” in citations and abstracts in academic (including peer
reviewed) journals in multiple databases. Papers that make reference to Dalgic and
Leeuw’s (1994) paper were added. For the time period from 1994 to the August 4, 2011,
the search yielded 562 hits.
In step 2, a number of search terms were used to narrow down the number of hits:
“drivers/antecedents, outcomes/effects/consequences, pitfalls, and performance/
 MIP profitability of niche marketing.” This search was conducted on the entire document
31,3 text (when available), but did not exclude papers for which only the abstract was
available. During this process, the number of papers was reduced to 235.
In step 3, these 235 abstracts were reviewed by two researchers to eliminate
irrelevant papers, including papers published in non-related disciplines (like
biochemistry), doublets, papers not substantially treating niche marketing (e.g. only
274 pointing to possibilities for exploiting niche markets/niche marketing but without any
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obvious empirical or theoretical contributions for the purpose of this research),

editorials, brief practitioner/consultant notes and book reviews. In order to avoid
disqualifying relevant papers at this stage, a paper was not excluded if there was any
doubt about its relevance. During this process, the number of papers was reduced to 92.
During step 4, the remaining papers were manually reviewed by two independent
researchers. During this step, 74 papers were eliminated from further analysis because
they lacked empirical or theoretical contribution, and 18 papers were retained for
analysis. Finally, in step 5, each paper was coded in terms of the research approach
adopted and its findings.

Findings
The results of this review are presented in Table I and include the identified research
approaches and the findings in terms of reasons for initiating, benefits, success criteria,
settings and potential problems. Only two papers, Echols and Tsai (2005) and
Swaminathan (1995), apply quantitative analyses, while the remaining papers use
some form of qualitative techniques.
This review reveals that niche firms mainly start with niche marketing either of
opportunity or of need, which largely overlap the combined suggestions by Dalgic
(1998). Further, the benefits of pursuing niche marketing consist of growth
possibilities, value creation and perceived value, profits, increased sales, prices and
market shares, customer retention/loyalty, increased competitiveness, some degree of
protection, higher purchase frequency and performance.
There are numerous success criteria for niche marketing, such as uniqueness, high
quality, relationships, commitment, dynamic capabilities, partial protection from
competition, customer value and, as Table I indicates, niche marketing is a viable
option in a variety of settings and industries. In addition, several papers warn about
possible problems associated with niche marketing, such as product cannibalizations,
lack of market and customer knowledge, competitor attacks and aggressive responses
from generalists, price pressure and temptation to go public. In sum, Table I
synthesizes research on niche marketing, provides a basis for further scholarly
enhancements, and gives examples for practitioners looking for why, how, when and
what precautions to make to successfully apply niche marketing.

Discussion
The reported benefits of pursuing niche marketing are numerous, particularly within
the areas of increased profits, prices, sales, growth, market shares and competitiveness.
Less frequently reported are benefits such as value creation, increased competitiveness
and better protection from competition. These reported benefits are in accordance with
previous findings and assumptions of niche marketing benefits (e.g. Dalgic and Leeuw,
1994), even though the previous findings are rather vague. However, it is important to
keep in mind that most of these reported benefits or performances of niche marketing
are based on perceived benefits and not actual or tested benefits, therefore, it is difficult
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Potential
Approach Reasons Benefits How to succeed Settings problems References

Case study Opportunity, Growth, value creation First mover, specialization, Competitive finance Sustainability Cameron (2011)
need dynamic capabilities, market, inefficiencies
structure
Case study Need Profits, share, sales, Differentiation, knowledge, Mature industry, Cannibalizations Parrish (2010)
loyal, competitiveness value, volume, labels, fashion retailing
consistency
In-depth n/a n/a Specialization, Seafood and wine n/a Toften and Hammervoll
interviews differentiation, narrow, industries, SMBs (2010a)
capabilities, knowledge
In-depth Opportunity n/a Strategic capability, Seafood export Losing control of Toften and Hammervoll
interviews relationships, commitment, industry, SMBs distribution (2009)
differentiation channel
Case study Opportunity, Sales, market share, Unique products, Mature market, n/a Byrom and Lehman
need profits production equipment, family-owned, (2009)
market knowledge multiple niches
Case study Opportunity, Price and profit Protection, channel control, Commodity market, n/a Schüßler (2009)
need value, identity, capability, market structure
knowledge
Industry insights Opportunity Higher growth rates Differentiation, adapted Natural/organic beef Lack of market Lau et al. (2007)
production practice market knowledge
In-depth Need More competitive and Knowledge, specialization, Mature industry, n/a Parrish et al. (2006a)
interviews profitable value, differentiation, textile and apparel
communication
Case study Opportunity, Profits, competitiveness, Knowledge, value, skills, Mature market, US n/a Parrish et al. (2006b)
need market share, protection timing innovative, textile and apparel
communication
Purchase data Need Higher purchase Differentiation, niche Australian wine n/a Jarvis and Goodman
frequency/loyalty channel, relationship industry (2005)
marketing

(continued)

Findings
Niche marketing

275
research

Table I.
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31,3
MIP

276

Table I.
Potential
Approach Reasons Benefits How to succeed Settings problems References

Quantitative n/a Niche positions and firm Involved in a highly US venture capital n/a Echols and Tsai (2005)
analysis performance embedded network industry, IPOs
Industry Opportunity Potentially highly Sufficient size, exploit n/a Difference Raynor and Weinberg
insights profitable tradeoffs between niches (2004)
and footholds
Time series data Opportunity, n/a Remain small, ownership, Mature industry, Generalists’ Swaminathan (1995)
need high level of institutional wine responds, few
support independent
distributors
Viewpoint Opportunity, Stay competitive Differentiation, value, Commodity market Channel and Suryanata (2000)
need symbolism, place-of origins product control,
new entrants
Review and Opportunity, n/a Specialization, Specialty food Decreasing niche Tamagnini and Tregear
market test Need communication, retail products demand (1998)
environment, differentiation
Viewpoint Opportunity, Rapid growth, profits Relationships, service, Fragmented, low- Pressure on Greco (1997)
need, concept knowledge dedication, price, foods, toys, prices temptation
reinvention apparel to go public
Viewpoint Opportunity Profitable Growth, margins, multiple Food market Slower growth O’Reilly (1995)
niches, reinvention, concept,
consistency
Conceptual paper n/a n/a Low-market concentration n/a Diminishing Noy (2010)
demand, attract
large competitors
 to verify these findings. However, the share amount of beneficial reports is rather Niche marketing
convincing. research
In addition, how to succeed with niche marketing is exemplified and well described,
and while diverse in recommendations, the examples are largely not in conflict with
each other. The majority of recommendations for niche-aspiring firms are, however,
centered round a few important issues. First, the issue of developing internal dynamic
capabilities as a basis for competitive advantage is important. This issue is also central 277
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in current strategy literature (e.g. Barney, 1991; Johnson et al., 2008; Teece et al., 1997),
and has previously been studied in relation to both niche marketing (Toften and
Hammervoll, 2010a) and market segmenting (Poenaru, 2011). Second, the issue of
specialization appears to be vital. Such specialization is primarily related to the
product knowledge and the ability to create unique and differentiated products, but it
can also be applied to other areas, such as customer specialization and in combination
with product specialization (Toften and Hammervoll, 2010b). This recommendation
is also in accordance with previous literature, since specialization has been emphasized
as a key to niche marketing (Kotler, 1989). Third, it is recommended to apply
relationship marketing. The necessity of developing long-term and strong
relationships with both customers and suppliers, in accordance with relationship
marketing literature, has long been regarded as a key to niche marketing (Dalgic and
Leeuw, 1994). Fourth, the issue of building protective barriers is set forth in this review
(e.g. Schüßler, 2009), which also includes barriers based on strong relationship and
dynamic capabilities. This issue has only vaguely been discussed in niche marketing
literature (e.g. Dalgic and Leeuw, 1994). Fifth, the issue of expansion strategies for
niche firms is mentioned in the reported findings (O’Reilly, 1995). There is, however,
little or no evidence pursuing multiple niches frequently produce such expansions.
This seems to be somewhat distant from the recommended segmented marketing or
differentiated marketing approach (Kotler, 2010), where targeting multiple segments
with separate marketing mixes is a central idea. It is, of course, possible that niche firm
expansion could counter niche market expansion to the point where the market and
firm stop being niche and start being large and less specialized (Dalgic and Leeuw,
1994). Another possibility for expanding, which has been studied in niche marketing
literature, is the possibility of expanding internationally by developing and exploiting
long-term relationships with downstream channel partners, such as importers and
focussing on similar international market niches (Toften and Hammervoll, 2011).
Further, niche marketing has been applied to a number of different industries and
firms of various sizes in domestic and international contexts. It has been suggested
that it is effective both in newly established and growing industries and in mature
industries. These findings are in accordance with previous literature (e.g. Dalgic and
Leeuw, 1994). However, based on previous niche literature with its frequent focus on
new and evolving industries, the amount niche marketing used in mature industries
found by this review is of some surprise.
Finally, in regard to potential problems of pursuing niche marketing, several issues
are identified. Particularly emphasized are the fears of losing control of distribution
channels, diminishing niche demand and attracting large competitors in the niche
marketplace. In addition, the issue of how to manage the sustainability of the niche
market is mentioned as a potential problem area.
When it comes to the more unsettled research areas, a few issues stand out,
particularly relating to definitions and attempts to distinguish between niche and
segment. Several of the applied definitions of a niche market bear clear resemblance to
 MIP definitions of a segment, although it is frequently claimed that niche and segment should
31,3 be treated differently (Dalgic, 1998; Dalgic and Leeuw, 1994; Shani and Chalasani, 1993).
Failing to do so has both conceptual and operational consequences and prevents
straightforward recommendation practice. However, how easy is it really to make this
distinction? It is clear at the very least that the concept of segment and concept of niche
are substantially overlapping concepts, if different concepts at all. The definitions are
278 similar and the applications appear to be similar. However, small differences, or nuances,
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can still be detected when comparing uses of the two concepts. First, there is the issue of
size. A niche is often portrayed as a single niche or, more frequently, as a small segment
or smaller than a segment. In addition, a niche often consists of only one or a few
customers and few, if any, competitors. A segment has normally more actors. Second, the
process of identifying a segment is frequently referred to as breaking up a larger market;
this process is less often referred to in niche literature. In niche literature, a niche is often
a smaller and almost independent part of a market, with a large referral market
alongside, such as the niche organic food alongside the larger and more conventional
food market. Third, niche firms appear to focus more often on a single niche and on
building protective barriers around this niche unlike the vast majority of firms targeting
segments. This may possible be explained in terms of firm size, where niche firms tend
to be smaller than firms that target segments.
However, to complicate matters further, the segmentation literature has, with some
success, made the claim that a segment could consist of one single customer (Kara and
Kaynak, 1997). Further discussion related to “the segment of one” is offered by Dibb
(2001), who suggests that one-to-one marketing will play an important role in future
marketing strategy, along the more traditional type of segmentation. She also raises
the question of whether the concept of a “segment of one” can actually be regarded as
a segment, given that the traditional definition of segments involves “a group” of
customers (Dibb, 2001). However, if the concept of “one” in segmentation literature is
accepted, defining a niche as a smaller part of a segment becomes challenging because
how can a niche market be smaller than a single customer?
Further, due to the nature of a niche market, there is problem of measurement of its
“uniqueness,” which may consist of a single customer. If niche markets are really
unique, measurements of differences and similarities between potential niches and
comparisons of these potential niches and non-niche markets will be difficult to make.
It is, thus, of no surprise that there are no known successful attempts to measure
differences and similarities between niches and non-niche markets. Admittedly, the
PIMS Studies (Linneman and Stanton, 1991) indicated that there are differences
between small and large markets, but this does not ensure that these small markets are
actually “niches.” In addition, according to Lindsay (2007), a niche market needs not
to be “small,” only “narrow.” For example, some firms, which have been claimed to
pursue a (multiple) niche strategy, such as Johnson & Johnson (Dalgic and Leeuw,
1994) and Heinz (O’Reilly, 1995), operate in markets that by most standards would not
be described as “small.”
In sum, this review suggests that niche marketing should not be treated as a theory
of its own, but rather as an applied strategy and possibly as an extreme case of
segmentation theory. It should also be noted that this applied strategy can be used
at several levels, both at the competitive strategy level and at the marketing
decision-making level (Poenaru, 2011). This view is also in accordance with Dalgic
and Leeuw’s (1994) findings. However, although niche marketing is closely associated
with segmentation strategy, we strongly disagree that this would imply that niche
 marketing only should be regarded as the last stage of the segmentation process as Niche marketing
suggested by Keegan et al. (1992) and referred to by Dalgic and Leeuw (1994). There research
are no substantial reasons for excluding the possibility of defining niche marketing as
a “process of carving out a small part of the market, the needs of which are not
fulfilled,” as suggested by Shani and Chalasani (1993, p. 58).
What then is niche marketing? First, in regard to the applied definitions, most of the
reviewed papers use the term “niche marketing” without further delineation, or they 279
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briefly refer to the term before moving on to other issues. Of the papers that attempted
to offer a definition of niche market, some settled by substituting niche with “small.”
Those authors who made a further effort also included the term “specialized.” Their
definitions were small variations of the definition offered by Dalgic and Leeuw (1994, p.
40): a “small market consisting of an individual customer or a small group of customers
with similar characteristics or needs.” The second, and less popular approach, follows
the claim made by Shani and Chalasani (1993, p. 59) that niche marketing is a bottom-
up approach where the “marketer starts from the needs of a few customers and
gradually builds up a larger customer base.” However, this approach is incompatible
with the claim of a “segment of one” (Dibb, 2001; Kara and Kaynak, 1997). In addition,
the findings from the reviewed papers suggest that niche marketing research is, to a
large degree, conducted on mature industries where actors are applying niche
marketing as a response to increasing concentration and competitive pressure. This
finding further contrasts the claim by Shani and Chalasani (1993).
In addition, the field of niche marketing suffers from another challenge that further
complicates matters: the perception of what a niche market is varies across individuals,
firms, industries and settings. For instance, Parrish et al. (2006a) provide an example of
how Honda perceives offering a two-door sports car to a niche market, while Porsche
perceives such a car to be a basic product. Parrish et al. (2006a) further claim that the
concept of niche is complex, and that it is made up of the three main components:
strategy, product and market.
The development of a suitable (parsimonious and comprehensive) definition appears
to have evolved only marginally since 1994. In order to contribute to defining niche
marketing, we suggest going back to Dalgic and Leeuw (1994). In their paper, Dalgic and
Leeuw (1994, p. 40) also offered a general definition of niche based on Webster’s
Dictionary (1992): “A recessed space or hollow; specifically a recess in a wall for a statue
or the like, any position specifically adapted to its occupant.” No reviewed paper
published after 1994 followed this alternative line of thinking. However, by exploring this
definition and applying it to business, a few interesting points could be used to enhance
the work on a definition. For instance, “a recessed space or hollow” fits nicely with Shani
and Chalasani’s (1993) “process of carving out a small part of the market.” Further, a
recessed space or hollow implies that three of the four sides are covered, or protected,
while there is an opening to the fourth – the larger referral market. This interpretation
has two implications: first, a niche market may need a larger referral market for making
a meaningful definition. It is much easier to distance, contrast and compare something
when there is already an existing and larger reference in place. Second, the three
protective sides of a “recessed space” resemble those of a situation of limited competition,
where there are effective barriers preventing or hampering competitors from entering the
niche marketplace. These issues of a larger referral market and effective barriers to
competitors have been insufficiently dealt with in past research.
This review suggests that an attempt to define niche marketing should consider
three important aspects that separate niche from segment. First, a niche market is
 MIP narrow in scope. The terms “small” and “narrow” are often used interchangeably, but
31,3 narrow appears to be most applicable. Second, niche marketing requires specialized
skills or assets, which enables product differentiation (perceived uniqueness) and
enhanced value for customers. This also includes a customer-desired pace of product
development, or, rather, dynamism. Third, in a sustainable niche market it is possible
to be protected by effective entrance barriers. Such barriers for competition could
280 include high product quality/attributes, personal and long-term customer
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relationships, patents, protected geographical indications and certifications schemes

for organic or environmental products, collective identity, high credibility/valued as
specialists by customers, focus on markets that are more capital and technology
intensive (particular effective when competing with firms or countries with low-cost
advantages) and aiming at markets with production seasonality.
Further, the better the niche market (the narrow part of the market) can be
protected by competitive barriers and valued by customers, the more sustainable it is.
For example, some firms are successful in carving out a narrow part in the high-value
crops market, but since they are not able to protect their niche markets, these firms
are not able to reap the benefits over longer terms – instead they are caught in the
niche-market treadmill – continuously seeking new niche markets (Suryanata, 2000).
By carefully attempting to include these important aspects and by building on an
adapted version of the definition offered by Shani and Chalasani (1993) (in particular
by substituting “small” with “narrow” and including the issue of protective barriers),
we suggest the following definition of niche marketing:
The process of carving out, protecting and offering a valued product to a narrow part of a
market that displays differentiated needs.
This definition does not deny the similarities between niche and segment, but it differs
from segmentation in fundamental ways. First, the definition does not require a full-
segmentation process in order to end up with a particular niche. A partial and selective
process suffices. This is in accordance with the findings of Toften and Hammervoll
(2009). Second, the niche marketing process could be either “bottom-up” or “top-down”;
this is possible without compromising Shani and Chalasani’s (1993) definition. Third, this
definition allows for niche marketing in both new and mature industries. Fourth, this
definition includes aspects of strategy, market and product as suggested by Parrish et al.
(2006a). Fifth, the often suggested components of niche marketing, differentiation
through specialization and value, are included in this definition. Sixth, effective
competitive barriers or protected sides are included as suggested by the general Webster-
based (1992) definition of niche and referred to by Dalgic and Leeuw (1994).

Conclusions
Main conclusion
The purpose of this research is to present a concise status of niche marketing by
reviewing recent papers on niche marketing research and providing a basis for both
further scholarly studies and insights for practitioners to use, particularly in terms of
identifying the benefits of using niche marketing, in what situations niche marketing
should be used, how niche marketing should be used and what awareness is needed to
avoid pitfalls.
In brief, this review reveals that niche marketing can be beneficial for some firms in
terms of increased profits, higher prices, higher growth, increased market shares and
increased competitiveness. In addition, niche marketing can be applied to different
 situations, such as a variety of industries, firms of various sizes, domestic and Niche marketing
international markets and new and established markets. Further, successful niche research
marketing appears to require the use of specialization, relationship marketing,
developing internal dynamic capabilities and building protective barriers. Finally, the
identified potential problem areas of pursuing niche marketing were related to fear of
losing control of distribution channel, diminishing niche demand, attracting large
competitors and managing the sustainability of the niche. 281
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We further conclude that niche marketing is an applied strategy similar to

segmenting, which can be used at both the competitive strategy level and the
marketing decision-making level. It can thus benefit from much of the general strategy
literature. In addition, segment and niche are strongly overlapping concepts, although
some nuances in perceptions can be detected, particularly in terms of size of markets
and firms, number of actors, the degree of specialization and use of relationship
marketing. In addition, segment and niche are identified differently as are their
expansion processes to some extent.

Managerial implications
First, niche firms need to specialize and product specialization is particularly
recommended. This implies making superior products and improving them over time in
a process that may be described as an intensive and ongoing new product development
effort. In other words, niche firms need to focus on offering the best possible product
according to the needs of the customer(s) in the niche. Such product specialization entails
product orientation but could be combined with customer orientation, which is
preferable. Customer orientation implies focussing on understanding the perceptions,
needs and wants of individual customers, and it may result in specializing for a
particular type of customer. Often, this results in a dynamic relationship where the buyer
and seller are working together to define individual customer solutions. This requires
mutual trust and commitment between the niche firm and customer, which necessitates
personal and long-term relationships. For many niche firms, it is sufficient to rely on only
a few key and long-term customers, so they may play down the use of regular marketing
communication activities. For niche firms with limited financial resources, extensive
marketing communication activities are not even an option.
Second, in order to be able to offer superior products over time, niche firms need to
develop internal dynamic capabilities. Dynamic capabilities are the sum of the firm’s
resources and competences. These resources and competences need to be distinct and
dynamic over time. Examples of this could be long-term supply contracts for obtaining
high-quality raw materials, special product or production knowledge, production
licenses, a certain location for optimal production and strong customer relationships.
Third, niche firms should focus on developing protective barriers for their niche.
Some of the best barriers to competition have proven to be long-term and personal
customer relationships, product specialization and other strong dynamic capabilities.
Fourth, regular marketing communication activities can be played down. Niche
firms are better off relying on word-of-mouth communication based on positive
customer experiences. Effects of such word-of-mouth communication can be further
enhanced if carefully supplemented by efforts attempting to attract positive editorials,
participating on trade fairs and similar activities.
Fifth, in terms of expansion, niche firms can either grow with their market to
eventually become a large, conventional firm or they can expand into other, similar,
geographical niche markets. This latter approach can be applied by selecting and
 MIP specializing in downstream partners, such as importers, since this strategy limits the
31,3 number of contact points and enables niche firms to focus on their expertise – the
product – and still be able to expand.

Theoretical contribution and avenues for future research

The work presented in this paper is the first comprehensive research review of niche
282 marketing research for nearly 20 years and adds to the current literature in several ways.
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First, this review reveals that there has been little progress related to concept
development even though there has been an abundance of practical applications of the
concept. One reason for this can be that the concept is studied in other literatures,
particularly in general strategy and segmentation literatures. The relationship between
niche and other literatures are briefly discussed in this paper. Second, this review
presents findings and recommendations from previous research. This includes niche
marketing benefits, situations in which niche marketing should be used, how niche
marketing should be used and awareness of any pitfalls of using niche marketing. In
addition to guiding practitioners, these findings establish current knowledge and can act
as starting points for further research. Third, based on previous definitions and
applications of niche marketing, this paper presents a short and concise definition of
niche marketing. This suggested definition incorporates the findings in this review and
could contribute to future research by providing scope and direction. Fourth, we suggest
that niche marketing is an applied strategy, which can be used at both the competitive
strategy level and the marketing decision-making level, similar to segmenting. Further,
based on the review and discussion, we find that segment and niche are strongly
overlapping concepts, although some nuances in perceptions can be detected.
What then is not known about niche marketing and what directions can be
pointed to for further research? More work can be done with regard to
operationalizations, measurements and, if possible, construct development.
Developing a generally accepted definition will make it easier to develop useful
operationalizations and measurements and thereby enable meaningful quantitative
tests. Further, it has been claimed that niche marketing is effective when offering a
new product to the marketplace (Shani and Chalasani, 1993) and when operating in
mature industries that have high concentration and price pressure (e.g. Byrom and
Lehman, 2009; Parrish et al., 2006a; Parrish, 2010; Schüßler, 2009). Can these claims
be tested? Can other industry phases or terms of the product life cycle be tested? In
addition, the issue of creating effective barriers to new entrants to a niche market
needs further attention. This is a critical issue for effective and sustainable niche
marketing. We do have substantial information about possible barriers, but few, if
any, studies focus on this matter in a structured manner. There has been little attempt
to identify them, establish what makes them effective, determine how they are put to
use in practice or how they can be sustained over some time. Finally, although there is
an abundance of niche marketing examples in the literature, there is still room for
more applied examples of both success and failure stories in regards to niche
marketing. More examples describing how firms have managed to carve out a
narrow part of a market would be of particular interest.

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Corresponding author
Kjell Toften can be contacted at: kjellt@rocketrange.no

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