Niche (pronounced neesh or nitch) is a word used both in ecology and marketing.

Its original use is as a noun to describe a shallow recess, especially one in a wall to display an ornament. It came into English from the French verb nicher to make a nest.

In ecology niche theory describes how an organism or group of organisms is always competing with others for the resources they need to survive. A strategy to reduce competition is to find a niche that other organisms aren’t using or not using very well. Here is a short explanation from Dr Seuss:

And NUH is the letter I use to spell Nutches,
Who live in small caves, known as Niches, for hutches.
These Nutches have troubles, the biggest of which is
The fact there are many more Nutches than Niches.
Each Nutch in a Nich knows that some other Nutch
Would like to move into his Nich very much.
So each Nutch in a Nich has to watch that small Nich
Or Nutches who haven’t got Niches will snitch.

It is similar in business. Your business is competing hard for customers and you have to work very hard to keep them or they will get snitched.

One way to decrease competition is to use a niche marketing strategy, which concentrates on a narrow sub-segment of customers. First you identify the customer needs or wants that are not being satisfied by existing businesses and then develop specialist goods or services that do satisfy them.

A very quick way of estimating whether your business can develop a niche marketing strategy is to look at your most loyal customers. First, determine if your best customers are price sensitive and second work out if they share particular characteristics.

If the core customers are not sensitive to price it means you can create a more specialist product or service that might cost more but will still be desirable.

If the customers share characteristics it means you can create more targeted sales and marketing tactics that will produce a higher return on your marketing budget.

There is a useful prediction from 1989 (Laurel Cutler, quoted in Phillip Kotler 1997 Marketing Management p251):

There will be no market for products that everybody likes a little, only for products that somebody likes a lot.