* … most relative to the more general preference, and probably still the next best alternative
Go back to the 80s or 90s and you would have been hard-pressed to find a lot of decent coffee or restaurants serving good vegetarian food (at least where I live in Auckland). There may be some places that serve good food, but most of the time the taste is not served well. Of course you could have ordered spaghetti bolognaise without bolognaise – but the dam is boring, and not worth the trip.
Being part of a special consumer group, like a vegetarian, can be difficult. These consumers may not be able to get what they want easily because the market is not sufficiently incentivized to provide the taste.
Today, in many food joints there is a lot to offer for different tastes. A true vegetarian meal is worth ordering. The market has evolved better to cater to these tastes. Not necessarily many vegetarian choices are omnivorous choices, but by definition. Omnivores accept a greater variety of foods than vegetarians.
Vegetarian food has gone from a niche with only a few consumers (for example, for cultural, religious or personal reasons) to becoming more common. Vegetarianism is a good example of a niche that has expanded.
This article discusses niche preferences in relation to markets, products and services.
What is the niche preference?
Niche consumer preferences by definition have only a small number of consumers. These consumers have similar characteristics. Niche consumer preferences generally fall into two types:
-
Niche because not many people like/need the product or service.
-
A niche is because of an exclusive product or service.
This article focuses on the first type – not many people like the product or service. A product can be niche due to taste, demographics, geography, or any number of other reasons.
The market is not very good at overcoming niche preferences
Markets are not very good at supplying people with specific preferences because offering many products or services requires sufficient incentives to create that supply. The incentive is usually smaller with some consumers unless there is a high willingness to pay in that consumer group.
With few consumers, niche products and services can be difficult to find. There may be a limited supply and some products / services. Or the product may be more expensive than expected.
That being said, markets can and do serve specific consumer needs, and may be better than the alternatives. Pricing mechanisms can encourage suppliers to meet specific needs. A more controlling distribution system can direct resources to meet specific consumer needs, but with other disadvantages (e.g., inefficiency).
Different preferences encourage market diversity
Multiple choice is good for the market because it supports a wider range of products and services than if preferences were more similar. Producers have an incentive to create a wider offering and cater to certain tastes. In this regard, multiple options support innovation.
Innovation gives consumers the opportunity to discover new products and services that better suit their tastes. This benefit is evident on the supermarket shelves. In New Zealand supermarkets, there are only a few milk brands, led by Anchor and Meadowfresh. Today there are many changes with many small players.
Niche markets don’t have to stay niche, and vice versa
Niche preferences can develop and become more mainstream as a product or service gains popularity. This is a big thing in the food industry with previously niche types of food like Asian fusion becoming more popular as people catch on.
Ultimately, producers have an incentive to expand their business and expand their niche.
In addition, products may become niche due to technological changes, different tastes or other market forces. For example, the market for vinyl records is much smaller today than it was in the 1970s. Although interesting, vinyl is making a comeback.
Not every preference can be fully filled
Having a variety of options in the market is good, it supports innovation and consumer choice. However, the market cannot cater for every choice, and it is not reasonable to not demand it. There are not enough resources on the planet, and for some products and services there is a limited ability to deliver (eg talking dogs).
This article discusses preferences in terms of markets – but the choice is more than that which includes social and political relations, among other things. Stay tuned for the next article discussing the difficulty of creating social cohesion when there are so many social and political choices.
▼▼ Thanks for reading. Share using the link below. ▼▼