Delivering a lecture on the `Role of Alliances in Conquering Niche Markets' at the Asian Paint Conference here, Asian PPG Industries Ltd's chief executive officer VS Ram said that with the change in consumer preferences and rapid progress on the technology front, the market today is witnessing a spurt in niche markets that could be tapped to fuel growth by the companies. Though, the size of the market may be small, niche markets bring more profitability to the companies operating in these areas as the size of the market would act as an entry barrier for other firms and therefore keep the competition at bay. Besides, serving niche markets needs special skills and technology which is difficult for other firms to replicate.

He said the niche markets can be classified into geographical, segmented, product specific and based on distribution channels. He said a classic example of successful niche marketing in the industry was that of the Asian Paints. Asian Paints, which is the market leader in india, has carved out a particular niche by launching products in small packets to cater to a particular market segment. Mr Ram said once a company identify a niche market, it should do a study about the market so as to know whether servicing such a market makes good business sense in terms of volume. Once this is established, companies should develop products based on their R&D skills to service the market. Another key factor in the success of niche marketing is to have a successful business model, he added.

He said, one way to tap the niche markets is through getting into alliances and partnerships with similar types of companies, where the business model matches along with the size of the companies and value systems besides a convergence of competence. These compatibilities are essential for an alliance to work successfully in the long run, Mr Ram added. He said such an alliance can bring four key advantages to both the partnership firms. The alliances could be in the form of a simple profit sharing arrangement and minority or equal equity partnership in the form of joint ventures, he added.