Mass or Niche Market? Or Both?

One of the things that I have always struggled with while making a pitch is defining the market, specifically the dilemma between a mass and niche market. Should you be selling your product at a low margin to a large number of people, or a very high profit margin to a niche crowd? Most companies go one way or the other.

Looking that the benefits of going for a mass market, there is much more potential to generate higher revenues due to sheer numbers. Its like casting a fishing net and trying to get as many fish as possible, without a focussed effort towards anyone in specific. However there are a lot of downsides to this kind of an approach. Firstly, a lot of investment and capital required get into mass production, and mostly companies lose out because their competitors are already established and operating in this setting. Moreover, to create a product or service that is suited to a large number of people is relatively difficult.

On the other side, it is much easier to create a product for a focussed group of people, and at the same time it is easier to understand the needs and aspirations of a small number of people. It is also relatively simpler to get into production fast, test the product, and make changes. (similar to what is stated in the HBS article we read this week). But all these benefits are overridden by the fact that a company needs to have higher profit margins to compensate for lower numbers.

Image Courtesy: Mark Smiciklas

After looking at the pros and cons of both, I reflected a bit about which direction I would be taking with my furniture, and as I looked deeper into it, I realized I will be doing a bit of both. Since I have two market segments; (graduate students in the US for home furniture and school children in villages in India), I will have to practice both the models, the niche market for the former and the mass market for the latter. I feel this will make it easier for me to enter the market in the US, and once the company has some gained some traction and it would be possible to mass produce for the rural market.

My next step would be to look for companies that have a similar model, what problems they have faced while doing it and what they have done to tackle them.