What is the difference Between a segmented market and a concentrated market

Do you know what luxury fashion houses like Gucci, Dior, Channel, etc., and the organic food market have in common? They both adopt a concentrated marketing strategy. In simple terms, concentrated marketing means selling to a particular market segment. This segment can be divided based on customers' age, gender, location, and income levels. Read on to learn more about concentrated marketing and how it works.

Concentrated Marketing Definition

When it comes to capturing the market, companies have two choices: go big or go small. Going big means reaching as many people as possible to make the most sales. This ideology is the concept behind mass marketing. Going small means serving a specific customer segment instead of everyone in the market. This is the idea of concentrated marketing.

Concentrated marketing is the marketing strategy focusing all marketing efforts on one specific customer segment.

Concentrated marketing is also known as niche marketing. Instead of pursuing the masses, companies go for the "niches"—small and specific markets with great revenue potential.

One thing to note is that a niche does not exist but is created by marketing efforts; the marketer has to identify a problem (opportunity) in the market and offer a solution.

In other words, concentrated marketing means identifying and serving a smaller, unique segment in the market. A niche company looks for an issue that other companies overlook and puts forward a viable solution.

One benefit of adopting concentrated marketing is that it requires fewer resources since competition is low. As a result, companies can save a lot of time and effort while focusing on creating added value.

Here are some ways to narrow a market:

• Price

• Demographic

• Quality

• Psychographics

• Location

Concentrated Marketing Strategy

So you know what concentrated marketing is, but what characteristics does it entail? Below are three main features of a concentrated marketing strategy:

• Serving one single market - Concentrated marketing focuses marketing efforts on one specific market. It finds a problem other companies overlook and provides a solution to it, thereby creating a new market.

• Adopted by smaller firms - Companies that adopt concentrated marketing tend to be small or at the beginning of their journey. By narrowing down the customer base, they can save marketing time and effort while building strong customer relationships.

• Focusing on problem-solving - Unlike undifferentiated marketing (mass marketing), where firms have to compete in nitty-gritty details to capture a larger market share, concentrated marketing focuses on communicating the core value of the business - "what problem does it solve?", "how would their life be different if they used the service?"

Concentrated marketing examples

To better understand concentrating marketing, let's look at two examples.

Concentrated marketing: Sports tourism

Sports tourism is a niche market in the travel industry. It involves people traveling from one destination to another to participate in or witness a sporting event. The target customers of this market include professional athletes/officials attending tournaments and sports fans worldwide.1

People travel for many reasons: to create, explore a culture, visit a famous landmark, or simply have a good time with their family and friends. The tourism industry thrives by recognizing these diverse needs among travelers and tailoring tourism products/services to meet these needs.

As you might be aware, the location of a sports tournament tends to alternate between countries around the world. For example, FIFA World Cup is held every four years in a new country. This change prevents favoritism and gives all economies a chance to boost their tourism and national income. Income streams are from multiple sources, such as ticket sales, tourist accommodation, and sightseeing.

Within sports tourism, there are even smaller markets:

• Professional players, coaches, and officials who participate in a tournament,

• Sports fans who fly from their home country to watch a sports league (e.g., World Cup, Olympics),

• Amateur athletes and hobbyists who want to take part in local sporting activities such as mountain biking, skiing, kayaking, etc.

Each of these niches would have different tourism needs. For example, sports fans would look for a place to stay and some activities to occupy themselves when not watching sports, whereas active sports participants would need extra services like gear, trainers, guides, etc.

Concentrated marketing: Remote workers

More and more companies are going digital, whether through a hybrid mode (office and remote) or as a fully remote option. Remote working offers convenience and freedom but also comes with many challenges, such as lower motivation, lack of equipment, communication, etc.

These challenges are great opportunities for businesses to practice concentrated marketing. For example, companies can work in a niche that helps people:

• Build a perfect office,

• Manage time more efficiently,

• Collaborate in real-time with other colleagues.

An example of a product in the remote work market is Stretchly - a break time reminder app. The app blocks your screen and provides prompts such as resting your eyes, taking a walk, etc., while you're taking a rest. Stretchly is a niche product that helps people improve their mental well-being while working from home.2

Advantages of Concentrated Marketing

Concentrated marketing goes for the smallest market possible with the most revenue-generating opportunities. This approach comes with several advantages:

• Little or no competition - Concentrated marketing targets markets outside the main markets. These are markets that large companies are not aware of or don't want to enter due to the lower profit margins. As a result, there is less competition. The company can become a market leader and capture a fair share of that market.

• First-mover advantage — When concentrated marketing is successful, there's a chance that the business will become a market leader and enjoy first-mover advantage (the idea that a firm is better off than its competitors since it is the first to the market).

• Strong relationships with customers - Concentrated marketing tailors the products/services to customers' specific needs, which earns them a higher customer satisfaction rate and more brand loyalty.

• Higher profit margin - Less competition means the company can set a higher price and earn a more significant profit margin. Not to mention, if the product/service the company provides is exclusive, customers will be willing to spend extra on them.

• Fewer resource use - Companies using concentrated marketing don't have to compete with well-established brands directly. Thus, they can capture the market with fewer resources and earn a higher profit.

Disadvantages of Concentrated Marketing

Concentrated marketing allows smaller companies to avoid competition and maximize their profit potential. However, it also has some disadvantages:

• Low economies of scale - Companies that adopt concentrated marketing have a lower production rate and thus can't take advantage of economies of scale (the cost reduction due to more output).

• Low barrier to entry - Since the product is new, any firm can imitate and become a direct competitor to the business.

• The need to be perfect - Concentrated marketing leaves no room for companies to make mistakes. They have to provide a valuable and workable solution to a market problem. Since all marketing efforts are concentrated in one customer segment, rejections can mean the end of the business.

Concentrated vs. Differentiated Marketing

Both concentrated and differentiated marketing is marketing strategies for businesses to reach specific groups of customers. However, they are not the same.

Differentiated marketing focuses on two or more segments of the market. Its purpose is to diversify the customer portfolio and maximize potential sales. Companies that adopt differentiated marketing strategies often have various product lines.

Check out our explanation of Differentiated Marketing to learn more.

An example is Coca-Cola. The soft drink giant has a diverse product mix of multiple brands, product types, and variants. While Coca-Cola primarily uses mass marketing, it also adopts a differentiated marketing strategy to reach different customer segments more efficiently. For example, the original Coca-Cola is promoted to younger people, whereas lower-sugar Diet Coke and Coke Zero are marketed to older groups.

The motto of differentiated marketing is "there's always something for everyone."

Concentrated marketing, on the other hand, only focuses on one market segment. The goal is not to diversify the customer portfolio but to niche down and build loyalty within one particular customer group. Concentrated marketing seeks to develop strong connections with customers.

Companies adopting concentrated marketing tend to be smaller or at the beginning of their journey. The lack of resources is their biggest motivation to go specific since smaller markets mean less competition and a lower marketing budget. When companies get bigger, it's harder to niche down as they need to be generalists.

One thing that concentrated and differentiated marketing have in common is personalized marketing campaigns. Marketing ads and content must resonate with the chosen segment the company targets.

We hope that this explanation has helped you gain a better understanding of concentrated marketing. Before you go, why not take our quiz to test your knowledge on this topic?

What is concentrated marketing?

What is a concentrated market example?

What is a concentrated target market?

What difference between concentrated marketing and niche marketing?