Focus Strategies and Niche Markets

Focus strategies is about saying No

Pick a very specific thing by segmenting a market and finding a large enough segment to produce a profit.

Can try and specialise on customers, products or geographical area.

Focus Strategies
 * If one competitor decides to target in one thing, you have to target another to be profitable.
 * This is assuming the two competitors are providing goods/services of different quality.
 * For there to be equilibrium, there needs to be a focus. No incentive for one firm to steal consumers away from their competitor.
 * One firm has to have a price in one range and the other must have the price in another range
 * Must stay in this range
 * Must have a minimum price and maximum price.
 * Willing to pay - actually pay = consumer surplus
 * Charge price to completely eliminate consumer surplus
 * To induce switching one firm would need to induce a higher surplus using the price

Superstar - one big hit product/service that is producing most of the value for a large number of consumers Long Tail - lots of little niche products producing value for small fraction of consumers Long Tail VS Superstar
 * Vanilla movies appealing to a large demographic. Horizontal Diff.
 * Vertical(Quality) differentiation occurs in both.
 * Low search cost and low inventory cost provide most of profit/revenue
 * Finding "hidden gems"
 * Edgy movies appeal to a certain demographic. Love or Hate. A small cult following. Horizontal Diff.
 * Vertical diff applies here too.
 * High-quality producers want mass market design
 * Low-quality producers want a niche market design
 * Less search cost leads to niche design
 * Superstar effect: More searching leads to more high quality
 * Long Tail effect: More competition leads to more niche targeting
 * Polarised to mass market appeal and niche appeal so there is no middle