Focusing on specific market subsegments allows businesses to address particular customer needs rather than competing across a broad spectrum. This approach, known as market niching, is particularly advantageous for smaller firms with limited resources, as it helps them carve out profitable spaces by specializing in distinct areas. By thoroughly understanding and catering to the unique preferences of their target audience, niche companies can often surpass larger competitors in meeting customer demands. This strategy can be effectively used by both small businesses and specialized divisions of larger corporations.

Customer niching involves catering to specific consumer preferences and needs. Market niching targets particular industries or lifestyle groups. Quality-price niching appeals to consumers seeking premium products that justify a higher cost due to their superior craftsmanship or exclusivity. Service niching focuses on delivering highly specialized and exceptional customer experiences. Some companies employ multiple niching strategies to cater to various market segments simultaneously.

While niching offers significant profit potential, it carries risks. A market niche can become obsolete, meaning that the specific needs or preferences it caters to are no longer relevant or in demand. Alternatively, a niche can attract larger competitors if it grows too large. To mitigate these risks, firms often adopt multiple niche strategies, diversifying their focus across different segments. Large firms like VF Corporation have adopted such strategies, creating distinct brands for specific lifestyle segments, from outdoor gear to sportswear.