McDonald's creator Ray Kroc built his fast food empire by creating a niche. And no, its niche isn't hamburgers.
McDonald's sweet spot--its unique value proposition--is offering a consistent menu everywhere in the world at a reasonable price. A Big Mac tastes the same in Seattle and Miami. And for those who buy franchises, the selling point is a chance to be their own boss with the company as a partner. McDonald's niche is, essentially, a business model.
McDonald's knows you can't be all things to all people. It won't work. You need to discover your real value proposition and share it with the most likely buyers in the best possible way.
But occupying a niche isn't always so simple. Selling a single product is often confused with having a niche.
Consider Walmart, for example. A typical superstore carries 142,000 items. Walmart's niche is not product but price, reflected in its slogan: "Save money. Live better."
To create and own your niche, you need to analyze your message and how different markets perceive that message.
3 Questions You Must Ask to Understand Your Niche
Understanding your niche is like a tune-up for your business strategy. To start, ask yourself:
1. What is my company's value proposition? Entrepreneurs frequently overlook this. Some of my favorite questions to ask are: If my business was a car, what make and model would it be, and why? If I could keep only one product or service, which would it be? These questions can help you determine the business that you're really in.
2. What is my company's target demographic? Many companies make assumptions about their target demographic without ever verifying whether their assumptions are correct. One way to know for sure is to sample customers or have a specialist firm research it. Ideally, you should collect about 1,500 names, but a smaller sample can work, too. Ask why and how customers are using your product or service. If their answers surprise you, it's time to review your marketing.
3. What does our ideal customer look like? Perhaps your current customers don't spend enough, or maybe they're high-maintenance. Calculate their lifetime value. If they don't rise to a sustainable level, fire them and find new ones.
How to Fine-Tune Your Perfect Niche
After you've looked at your business, your current customer base, and your ideal customer, you may wish to narrow your niche to reach more of the customers you want.
1. Look at your competitors. Is there room in your niche? Are there things you can learn from what they're doing right or wrong? What can you learn from their successes or failures? Triumphs can show you which strategies work, while examining competitors' pitfalls can help you make your product or service more attractive to prospective consumers.
Being the only player in your niche is exciting. But without competition, you have the burden of creating a new market. As I've discussed before, sometimes being too niched can become a problem. If there's no competition, you assume the role of being the sole educator about your product or service. Keep this in mind because it can be expensive and easy for someone to ride in after all your work to poach your would-be clients. Make sure that your niche is big enough to support your business.
2. Determine potential economic and technological changes. It's important to stay ahead of new trends that could affect your business--or risk having the rug pulled out from under you. Blackberry was overwhelmed by smartphones from Apple and Samsung, and now it's struggling to find its place in the mobile market.
If you give your business strategy a regular tune-up, you'll be able to identify the message your company is currently sending and fine-tune it to draw in the right customers.
You don't have to reinvent the hamburger to find your niche. Often, it just involves repackaging your current offering to attract more of your ideal customers.