A niche strategy, with a focused range of products, can enhance a firm's image by positioning it as a specialist in the market. This is contrasted with offering too wide a variety of products, which can dilute the brand.
A company with fewer product variations, adopting a strategy that focuses on a specific segment of the market, is referred to as employing a niche strategy. This approach can improve the firm's image if consumers perceive the company as a specialist with a clear, specific position in the market. Focusing on core competencies and offering differentiated products that stand out in terms of physical aspects, location, intangibles, or perceptions can be critical in achieving this.
So, a niche strategy helps companies to enhance their brand image by becoming renowned specialists in a particular market segment, rather than diluting their brand with too many product variations which can lead to a confusing market presence.