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Smaller Companies Effect On Larger Companies

Essay by   •  July 20, 2011  •  1,322 Words (6 Pages)  •  1,208 Views

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There is a new generation of competitors that has entered the market and is posing a great threat to larger companies. These companies tend to operate more on a specific niche, which makes them appear “closer to the customer”.

These companies concentrate on selling to a smaller market. This can help lower costs because specialization creates savings. These smaller firms can concentrate on establishing a strong image and position in their niche. Niche marketing also targets customers more specific needs. Customers today have more of a selection to get the “exact” product that they desire.

The Solomon text refers to a subject that can help illustrate the benefits of niche marketing. On page 457, Solomon refers to social stratification. Social stratification refers to a creation of artificial divisions in a society: “those processes in a social system by which scarce and valuable resources are distributed unequally to status positions that become more or less permanently ranked in terms of the share of valuable resources each receives.” Solomon, 457.

Companies that appear “closer to the customer” seem to give customers more of what they want, where larger companies and retailers don’t have this specialization. Higher social classes tend to want a more specific product and are willing to pay the extra money to receive it.

According to http://exinarticles.com, niche marketing reduces marketing costs because you don’t need large forms of advertising. In other words, you don’t have to pay for expensive costs such as television commercials, full page magazine ads in well known magazines etc. Services by these smaller companies can be completed quicker and more efficiently and therefore will earn higher profits.

Another reason this area is growing so quickly is because many smaller retailers see fewer companies that are competing in their specific niches. Companies such as these are looked at as a “specialized service” and therefore it puts you in a completely different class from other competitors. If you are the first to enter this area, chances are that many other small companies will eventually try to duplicate what you have done. Usually by this time you will have already developed customer loyalty and you will have had time to improve and perfect your business.

The website http://www.thewebmark.com also highlights some advantages to these smaller companies. One section of the website is titled Less Traffic for More Business. This section states that these companies will get a lot more traffic because people today are searching for specific items a lot more frequently. Even though maybe only a few people that come into contact with your business may make a purchase, they will tend to keep your company in mind for future purchases.

Since the boom of the .com industry and with the quick advancement of technology, more people are turning to their computers to make everyday purchases. Shopping online is not only convenient but also quick and easy. Customers don’t have to leave their homes and this is especially helpful for most customers that lead fast paced lives because they can shop 24 hours a day. The Internet helps these companies build business by keyword searches. This makes it easier for customers to locate products more specific to their individual needs. This is definitely helping the success of these small companies against larger retailers. Links, html tags along with search engines are the reason for this.

The opposite of niche marketing is mass marketing which is what the larger retailers participate in. The difference between the niche marketing and the mass marketing class is based upon the product and how it is presented to the consumer. Solomon refers to “affordable luxuries” and many products that weren’t available to many customers in the past are now easily attainable. I will use the example of electronic devices. When items such as computers, portable music devices and cell phones were first introduced, many people couldn’t afford them. Technology was just taking off and it started advancing at a more rapid pace. When this happened, the items became more affordable because the early models became outdated quickly. Electronic devices are now known as an “affordable luxury”.

Another reason for the rise of the mass class as stated by Solomon is that in many countries long ago there was a large gap in the social classes. However, now that some of these countries are developing their own technology, this gap is closing and many of the classes are evening out so they are easier to market to as one industry rather than “the rich” and “the poor”.

Today in the United States that “mass class” is also rising because customers are gaining purchasing power. Solomon gives an example of the launch of economic and affordable cars. These items are marketed towards a huge portion of the

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