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How to Determine Niche Attractiveness

After you pick an attractive industry for your business model, it’s time to find an attractive niche. Your niche market is a subset of the overall market you participate in. Discovery Networks International participates in the broadcast television industry, but its niche is infotainment.

Shows like MythBusters, Dirty Jobs, and Deadliest Catch entertain with an educational bent. The shows on Discovery Networks’ channels attract a certain type of audience. This niche has proven to be a good one. Discovery Networks has grown steadily to reach more than 300 million international subscribers.

The power of a good niche

Picking the right niche may be more important than picking the right industry. Vistaprint was founded in 1995 when the traditional printing business was getting crushed. Thousands of printers went out of business during the 1990s and early 2000s. During that time, Vistaprint grew into a billion-dollar business.

How could Vistaprint grow when other printers were dramatically shrinking? Vistaprint targeted micro and small businesses considered too small for traditional printers. Combined with ingenious leverage of technology, Vistaprint turned unprofitable small customers into one of the most profitable printing operations in the world.

Unlimited niches exist

Good news! You can find unlimited niches within any market. At the core of many successful companies’ strategies was the creation or refinement of a new niche. Here are some examples:

  • Panera Bread: Healthier, higher-quality sandwiches aimed at the fast food industry.

  • Häagen Dazs: High-end ice cream at triple the price versus other ice creams in the frozen desert industry.

  • Starbucks: Not just a cup of joe — an experience. You could argue that Starbucks is in the restaurant industry, and it is. However, Starbucks also competes against convenience stores for coffee sales. The niche in either case is the customer who wants the full Starbucks coffee experience.

  • McDonald’s: Fast, consistent-quality food. This niche in the restaurant business is mature and crowded today, but when McDonald’s started, it was a new and untapped market. By catering to customers who wanted consistency in fast food, McDonald’s dominated this niche.

  • Coach: Everyday luxury. Coach bags are more stylish than a department store brand but priced much more reasonably than high-fashion brands. This half high-fashion, half department-store niche has worked well for Coach and other everyday luxury brands.

  • iPad: An e-mail and Internet toy. Apple found a great niche between a laptop, Gameboy, and smartphone.

How many different niches can the hamburger business support? A lot more than anyone expected. The hamburger was invented around 1890, and the first hamburger restaurants began appearing in the 1920s. Since then, dozens of spins on making a hamburger have appeared. Here’s a partial list of hamburger chains and their niches.

Hamburger Chains and Their Niches
Chain Niche
McDonald’s The kids’ burger chain
Wendy’s The adults’ burger chain
Red Robin Gourmet burgers
White Castle Craveable sliders
Rally’s Drive-through only
Steak ‘n Shake Sit-down burgers with a diner feel
Five Guys Simple, fresher burgers and fries
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