Strategic Positioning of Goods in a Market with a Niche

Posted by D. Daniel Sokol

Eleftherios Zacharias (Department of Economics, Athens University of Economics and Bussiness) analyzes Strategic Positioning of Goods in a Market with a Niche

ABSTRACT: We use the Hotelling’s model allowing for a “gap” in the consumers’ preferences. As a result, the characteristics space is divided in two separate intervals. The largest one represents the main market, and the smallest represents a niche. We find that in this set up the principle of maximum differentiation may not hold. We also, examine the incentives of a firm to adopt a niche marketing strategy. That is, to relocate and price its product so that to maximize its profits from the niche market only. We show that, as the reservation value of the consumers for the product increases, it is more profitable for a firm to adopt a nich marketing strategy.