Focus strategy: How to stand out in a specialised market?
7min • Mar 7, 2025
Olivier Renard
Content & SEO Manager
In February, Ferrari rewarded each of its 5,000 employees in Italy with a €14,400 bonus after a record-breaking year. Yet, the Italian car manufacturer reported €6.68 billion in revenue, far behind Volkswagen’s €320 billion.
This success is not based on volume but on a marketing strategy that has remained unchanged: focus (or concentration) strategy.
Key Takeaways:
A focus strategy involves concentrating on a specific market to offer a tailored product or service to a well-defined customer base.
There are two main approaches: cost-based or differentiation-based, depending on whether the company competes on price or through a unique offering.
This strategy reduces competition and enhances customer loyalty, but it can also limit growth opportunities.
Ferrari, Rolex, GoPro: major brands use this approach to stand out and dominate their market segment. It is also highly suitable for SMEs.
🔍 What is a focus strategy, and how does it differ from other competitive approaches? Discover its principles, advantages, and how to implement it successfully. 🚀
What is a focus strategy?
Definition and origins of the concept
The focus strategy, also known as the concentration strategy, involves targeting a specific market segment rather than addressing the entire consumer base.
The goal is to meet the expectations of a niche audience with a tailored offering—often more differentiated and specialised than what generalist competitors provide.
Instead of competing on volume, this approach relies on specialisation to stand out.
The focus strategy is one of the three generic strategies defined by Michael Porter in the 1980s. According to Porter, a company can achieve competitive advantage in one of three ways:
Cost leadership: producing at a lower cost to sell at a competitive price.
Differentiation: offering a unique product or service across the entire market.
Focus strategy: targeting a narrow segment and excelling through cost advantage or differentiation.
This strategy is based on the principle that specialisation enables better performance than companies attempting to serve all markets. By focusing efforts, a company can offer expertise, service, or quality that generalist players cannot match.
Focus strategy vs. Niche strategy: What’s the difference?
A focus strategy is often confused with a niche strategy, but there are key differences:
A niche strategy targets a highly specific market with limited demand. The company identifies a unique opportunity based on an unmet need, often overlooked by larger corporations.
💡Example: MATwatches is a high-end technical watch brand following a niche strategy. It primarily serves elite military units and special forces operating in air, land, and sea environments.
A focus strategy, on the other hand, applies to a broader segment. The company does not limit itself to a micro-market but differentiates itself by serving a specific group better than anyone else.
💡 Rolex targets luxury watch enthusiasts. The Swiss brand applies a focus strategy within the premium segment.
It partners with renowned sports figures to reinforce its global reputation. Through strong branding, Rolex remains recognisable even when its advertising does not feature products.
Carlos Alcaraz (Source: Rolex)
Types of concentration strategies
Michael Porter identifies two types of focus strategies, depending on the competitive advantage pursued. A company can either compete on price to attract a specific segment or differentiate itself with a unique offering.
Cost focus strategy
This approach aims to become the lowest-cost provider within a specific market segment. It requires reducing production and distribution costs to offer competitive pricing without attempting to serve the entire market.
💡 Example: Action, the discount retailer from the Netherlands
Action does not compete with the big general retailers, but specialises in very low-priced everyday products (decoration, DIY, hygiene, etc.).
Its mix is based on a limited range, rapid stock turnover and optimised logistics. This rationalisation enables it to offer ultra-competitive prices in its segment.
Focused differentiation strategy
Conversely, some companies adopt a differentiation-focus strategy by developing a unique offering within a specific segment. Their goal is not to be the cheapest but to create high perceived value through innovation, quality, or exclusivity.
💡 Example: Ferrari, the icon of luxury cars
The prancing horse brand does not compete with mass-market car manufacturers such as Volkswagen or Toyota. Its strategy is to focus on differentiation by producing high-end vehicles in limited quantities
They cater to a clientele seeking exclusivity and high performance. Their high price is not a barrier, but a positioning factor: owning a Ferrari represents prestige and technical excellence.
Porter's Generic Strategies
Both Action and Ferrari apply a focus strategy, but with completely opposite approaches.
Other forms
Beyond cost-based and differentiation-based approaches, a focus strategy can also be geographical.
💡 This is the case of a restaurant that focuses on a specific delivery area can better adapt to local preferences and optimise its delivery costs.
Regardless of the type, defining a clear segment and adapting the brand’s positioning is essential for market success. Identifying Key Success Factors (KSFs) is crucial for this.
Advantages and challenges
A focus strategy allows businesses to specialise within a market segment. While it offers strategic advantages, it also presents risks that must be anticipated.
Key benefits :
Reduced competition: By targeting a specific segment, the company avoids direct competition with industry giants.
Deeper market knowledge: Specialisation allows for a better understanding of customer needs, enabling tailored offerings.
Stronger customer loyalty: A well-adapted offering creates a strong emotional connection with customers. This gives them greater satisfaction and increases retention.
Optimised resource allocation: Instead of spreading efforts too thin, the company focuses on a precise audience, improving efficiency.
Challenges and risks:
Dependence on a restricted segment: focusing on a single market means that the company is highly dependent on its target. If demand falls, the impact can be critical.
Vulnerability to market shifts: a change in consumer habits or the arrival of a disruptive competitor can weaken a company's position.
Barriers to expansion: strong specialisation can make future diversification difficult. A company with a strong position in a niche market may find it difficult to broaden its offering without losing its identity.
Highly effective but demanding, a focus strategy is a powerful differentiation lever. However, it requires constant market monitoring to adapt to shifts and mitigate risks associated with over-specialisation.
How to implement an effective focus strategy?
To successfully execute a focus strategy, a business must choose the right segment, define a clear offering, and tailor its marketing approach. Each step requires thorough analysis to ensure relevant positioning.
💡 The SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) is a great starting point. It helps identify the strengths, weaknesses, opportunities, and threats within the target market.
This framework allows businesses to validate the viability of their positioning and anticipate potential risks.
Example of a SWOT analysis
1️⃣ Identify a viable market segment
Specialisation requires a deep understanding of your target audience. It is essential to analyse:
Customer needs and expectations: What problems do they face? What products or services are they looking for?
Market size: Is it large enough to be profitable? What is the level of competition?
Trends and market evolution: Is the segment growing, or does it present long-term risks
2️⃣ Set clear strategic objectives
Once the target market is identified, define the goals you want to achieve:
Positioning: How do you want customers to perceive your brand?
Market share: What percentage of the segment does your business aim to capture?
Competitive advantage: Will you focus on price-based specialisation or a strong differentiation strategy?
Define your OKRs (Objectives and Key Results). This step is crucial as it serves as a guiding framework for all strategic decisions.
3️⃣ Develop your USP (Unique Selling Proposition)
To capture your target audience’s attention, you must offer something unique. This involves:
Differentiation: How does your offer stand out from existing alternatives?
Branding: Creating a strong and memorable brand identity.
A clear positioning: A simple yet impactful message that highlights your value proposition.
4️⃣ Implement an effective marketing strategy
A well-executed communication strategy helps build awareness and attract your target audience. To achieve this, consider:
Choosing the right channels: Social media, online advertising, events, word-of-mouth... Be present where your audience is.
Adapting your messaging: Align your brand tone and message with your target audience.
Optimising advertising targeting: Define demographic, behavioural, and geographical criteria to reach the right segments.
By unifying customer data, a Customer Data Platform (CDP) enables more precise segmentation to refine targeting. With a better understanding of customer behaviour, businesses can personalise messaging and optimise marketing campaigns.
5️⃣ Continuously monitor and adjust
A successful focus strategy must be adjusted based on performance. To do so, it is essential to:
Measure performance using relevant KPIs (sales, engagement, brand awareness).
Test and optimise through A/B testing and customer feedback.
Monitor competitors to stay ahead of market trends and adapt accordingly.
Conclusion
Successfully executing a focus strategy requires in-depth analysis and precise execution. By targeting a specific segment with a unique offering and a well-tailored communication strategy, a company can stand out and build lasting customer loyalty.
👉 The DinMo Composable CDP enables businesses to leverage customer data stored in their data warehouse. It allows for better segmentation, personalised interactions, and maximised marketing campaign impact.
FAQ
What are the key indicators to measure the success of a focus strategy?
Measuring the success of a focus strategy requires tracking several key performance indicators (KPIs).
Market share within the targeted segment is crucial, as it reflects the company’s ability to dominate its niche.
Customer retention rate indicates how well the strategy builds loyalty.
Profit margins are another key factor—companies using a cost focus strategy should see lower operational costs, while those using a differentiation focus strategy should achieve premium pricing.
Additionally, brand recognition among the target audience and customer satisfaction scores help assess whether the company successfully positions itself within the market.
Finally, competitive advantage sustainability determines if the strategy provides long-term business growth.
How can a company expand its market without losing the benefits of a focus strategy?
A company using a focus strategy can expand without losing its competitive advantage by gradually broadening its market segment. One method is geographical expansion, where a brand maintains its niche positioning but enters new regional or international markets.
Another approach is product line extension, introducing variations that still cater to the original target audience. A differentiation focus strategy company can leverage brand loyalty to introduce complementary premium offerings, while a cost focus strategy firm may optimise operations to scale efficiently.
Maintaining a strong customer relationship and using market segmentation tools, like a Customer Data Platform (CDP), helps refine targeting without diluting brand positioning.
Which industries benefit most from a focus strategy (and where is it risky)?
A focus strategy works best in industries where customer loyalty, brand perception, and specialisation drive success.
Sectors like luxury goods, high-end automotive (e.g., Ferrari), and niche technology (e.g., Apple’s professional product lines) thrive on differentiation focus strategy. Similarly, discount retail (e.g., Aldi or Action) benefits from a cost focus strategy.
However, this approach is riskier in rapidly evolving industries like consumer electronics or fast fashion, where competitors can quickly imitate niche innovations. It is also challenging in highly regulated markets, where legal barriers may limit long-term sustainability.
To succeed, companies must regularly reassess their competitive advantage, market segment relevance, and pricing strategy.
