I know of many businesses that cater to specialized communities or a specialty or niche in a market and I think this is a very good idea.
That is exactly what I did when the market I was in was broadening to include more and more services "all inclusive" I sent the opposite direction and pick one small piece of it and became the "expert" and "specialist" at just that. And we were not even the least espensive. It proved a very successful model for us.
The can thrive by really knowing their market and what they need and becoming expert at providing just that. Give your clients a better service or product than they can get anywhere else.
How to make people aware of your product is all about branding and marketing. You have to know who your demographic is, where they would find out about you and then create a brand and message that gets their attention and tells them exactly how your product/service solves their problems and why it is better.
When it comes to marketing, most people don't really realize the problem until it is brought to their attention and then they say to themselves "that's right, I need that."
As for the last question "Do you feel niche type businesses need to change from their original concept to grow?" I'm not exactly sure what you mean.
I think many niche business owners are willing to grow if they knew how it fit in their current business model.