Before you launch a business or a new product, you need to know whether an opportunity exists in the market, how big it might be, and how you can stand out. We chat to two founders on the practical things they did to assess their market, before turning our attention to the importance of nailing down a unique brand positioning.
AMIRAH JIWA: From Courier, I'm Amira Jiwa.
DUNCAN GRIFFITHS NAKANISHI: And I'm Duncan Griffiths Nakanishi.
AMIRAH: And welcome to Courier's Workshop podcast. Every two weeks Workshop breaks down one essential business topic and explains how it could be useful for you. Our goal is to get you just the right amount of info to help you apply what we're talking about to what you're working on. I'll be speaking to experts with practical tips and founders with relevant experience.
DUNCAN: And I'll be explaining essential terms and summarising the key takeaways at the end of the show.
AMIRAH: Today, we're talking about how to assess the market to make sure there's an opportunity for you to capitalise on and then how to develop a brand positioning that cuts through any noise and helps you stand out. We talk to founders of companies in two different sectors – activewear and beverages. Both of them emphasise that a crowded category isn't necessarily something to be afraid of when launching a new product.
MEG HE: I personally don't think that a lot of other businesses starting one sector means that you can't go there.
MARISA ZUPAN: Generally speaking, if you see new entrants and a new part of a category, those people probably are onto something.
AMIRAH: First up, here's Meg He, co-founder and co-CEO of ADAY, a direct-to-consumer womenswear brand that makes versatile pieces. Meg and her co-founder used their collective experiences in fashion, VC and retail to enter a market that they saw as having a lot of potential while solving a real problem.
MEG HE: I went to Stanford for my MBA. And we do this thing there, which is called design thinking. And a lot of it is really just about having a really flexible approach and having a problem that you want to solve. So our initial problem was really just about how can we create something that simplifies women's lives. And that's as broad as it was. When we went to do initial surveys, it wasn't really about apparel, and it wasn't really about activewear. It was just about where are the sticking points in your day, and then going from there, and then narrowing down from there. We spent a lot of time talking to customers one on one, and really understanding what the user profile was, and really building out that customer – who she is, what's important to her, what are the problems that appear in her every day.
AMIRAH: So then what led you to apparel and activewear specifically?
MEG: I think Nina and I are very passionate about women and simplifying things for women. But also, Nina was a former competitive gymnast at the national level in Germany. And I had done my yoga teacher training. So we knew a decent amount about functional fabrics. I had also been an eBay powerseller when I was a teenager, and I sold a lot of clothing on eBay before. I had also worked at Poshmark.
So I think a lot of our career had really intersected at this point between e-commerce and fashion and technology. And so I think it was not surprising to anyone that the solution that we ended up with had something to do with fashion and technology and e-commerce.
AMIRAH: Obviously you both had relevant experience in the sector. But did you look for any specific market data or trends to make sure that the problem you're solving had business potential?
MEG: You know, with all that in mind, it was important for us to start a company in a high growing sector and a market. A cap company has a lot of potential to grow into a new demographic. I do think that and I would recommend that people look into comps in the past, whether there's a fundraising comps, or exits.
DUNCAN: Definition time. ‘Comps’ is short for ‘comparables’, which means making some form of comparison, often financial, with other companies in the same sector.
MEG: Even if you don't do that work, your VCs will do that work at the next stage. So you should just save them a bit of time and not get rejected at that next stage because they can't find any worthy comps. And I think you can be very loose about that. They don't have to be exactly in your sector. But I think also seeing those comps on a piece of paper and seeing all those companies made so much money. And that means that we could do so well as well. It feels like a really nice boost of confidence.
In this sector, you had the Lululemon IPO; there was a company called Lucy, which had exited to VF Corp for I think £200m or £300m; there's a company called Perano who had exited Colombia for about $120m. And all of those have actually happened in the last like 12 to 36 months. So it looked like a really promising sector.
AMIRAH: And was all the activity that you were seeing in the sector a concern? Were you worried about how to build something that could stand out?
MEG: I feel like businesses always start with little batches. So, if someone's really interested in food delivery, then there's usually five other companies who are also going off that same sector. I actually think this is a good thing, because often your customers will be hearing similar conversations – you're not going to be the first person to come to them with that proposition. You just need a better and different proposition. And the same with venture capitalists, but it does mean that you have to have a hard head and determination to be able to win through it.
But I definitely would look at other companies to see where they are getting funding. How is the attraction going? What are the pitfalls? What do you think the downsides of their business model is, and how are you going to resolve this differently?
AMIRAH: Here's Marisa Zupan, CEO of United Sodas of America, a line of healthier sodas that come in 12 flavours and bold, minimal packaging.
Marisa used her years of experience in the beverage sector to develop a new product that caters to what she identified as an unmet need.
MARISA ZUPAN: Before you would have a few core – orange juice and sparkling water and some soda. Then the shelf expanded into coconut waters and aloe waters, and you name it. And it kept going and going and going. Yes, the space was crowded. But it also meant that everyone was trying to solve a really important problem.
AMIRAH: OK, so once you knew what problem you're solving, how did you decide what the right solution could be?
MARISA: We realised that most of the new innovation that was happening in the market around ready-to-drinks, and anything carbonated or functional was always adjacent to soda, it was always a solution to soda and all called something different. Sparkling tonic, sparkling water, kombucha, whatever – they're slightly out, kombucha is slightly in the more functional space, so out of our category, but we found that customers are really gravitating towards these alternatives, while the word ‘soda’ was more and more something that people were running away from.
So we looked at that, and we said, ‘Oh, what if we could create an alternative, but an alternative that went straight for the heart of soda?’ So that was a first differentiating factor for our project. When we first start talking to people about soda these days, the first word that they always say is ‘bad for you’. First thing. ‘Really bad for you.’ ‘Sugar is way too high.’ ‘Responsible for obesity in this country and all around the world.’ ‘I haven't had a soda in years and years and years and years.’ Fine. You have a conversation, you move on, you talk about other beverage habits. And then by the end of the conversation, there's these stories that pop up like, ‘Well, one time, when I was driving cross country with my dad, I had to have a Coca Cola. So we went to a diner, and we sat down and had a Coke, and it was the most incredible experience.’ Or, ‘Whenever I go to the movie theatre, I have to say, it's not a good movie theatre experience unless I have a Dr Pepper in my hand.’ So there's these little cues that we picked up on that said: even though we're not hearing from them, please make a new soda.
We did find some really interesting opportunities when you took the needs, and then the nostalgia – or the emotional needs – and found that there was some opportunity between those two.
AMIRAH: Who did you decide was the audience that you were going to target?
MARISA: First identify a target that it was going to speak most to, and perhaps a target that was going to be influential of other people. So we found a sweet spot, which was the older end of Gen Z, and all the way up through millennials. So these are people that have a lot of cultural power, they're right now shaping a lot of what people see and care about and hear, and movies and culture, etc.
And then what we did is we sized that market, and then we understood their impact on other generations, other categories. So they have both impact on the older generations – they tend to influence the decision of buying behaviours of their parents – things like this. And then they also happen to have impact on the younger generation. So the younger sisters, younger brothers of Gen Z –they definitely have impact on those generations.
AMIRAH: So you mentioned that you sized that core target market, and then there's other secondary audiences as well. How did you find the data that you needed to do that?
MARISA: Demographic is much more easy to find online, googling and buying reports, one-off reports, things like that. Psychographic specificity is much more difficult, much more expensive.
DUNCAN: Hey, me again. Whereas demographics looks at who the customer is, psychographics looks at why they buy – taking into account their buying habits, attitudes, values and opinions.
MARISA: There are tools that exist that allow you to size markets. And if you know someone who has access to those tools, I strongly recommend that you tap those people. We did have access to psychographic specificity, merely because of my background and the tools that I had access to. But if you don't have that, you can find ways to piece it together. And you can find ways to connect with people who have experience in those markets.
So if you're trying to develop a new pasta sauce, it might be worth just having conversations with people who are steeped in that if you're not. They'll be able to tell you that information off the top of their heads because they live it every day. It is really about resources. If you don't have the resources to get that detailed information, you can get scrappy about it. And I don't think it means that you are locked out of the opportunity to develop a product that's really special.
AMIRAH: Finally, how do you balance all of that data with the intuition needed to build a really strong positioning?
MARISA: Positioning the product in a really rational way using data analysis and sort of proving the viability or the potential of a product is one part of brand positioning.
The other part of brand positioning is what I consider the more intuitive, potentially ‘irrational’ side of building a brand. There's these ineffable qualities that brands need to inhabit and they need to bring to light that are beyond words, beyond numbers. And those two things need to be developed in conjunction, not separately. There's not a clear baton handoff, any more. I think you need to bake the cake together. When you're baking a cake, you don't put half of the ingredients in the oven and then pour the eggs and the sugar on top of those – they all need to come together, they all need to bake together. So to have creative voices helping you develop a brand proposition earlier on than you think is wildly important for you to be able to understand truly what your brand positioning is.
AMIRAH: So Meg and Marisa have made clear that the problems worth solving are likely to be in fairly crowded markets. But how do you build a positioning and a brand proposition that will reach the right people and capture some of that market share?
We spoke to Jonah Fay-Hurvitz, who leads strategy at Red Antler – that's a brand company behind some compelling positionings for brands like Casper and Allbirds. Here's his perspective on the importance of a unique positioning in markets with multiple players, and how to develop one with mass appeal.
JONAH FAY-HURVITZ: We need to be developing positions that are solving a real problem and that are based on a human truth. Now, another business might have already identified what that problem might be. And with that, it is really essential that you are looking out into the categories, studying the competition, and understanding what other people are doing, what they're saying, how they're expressing what they believe and what they stand for.
There are tonnes of examples, though, of businesses that offer pretty much the exact same thing. But because of their positioning, they are both able to exist. So I think the best example of that is in ride sharing with Uber and Lyft. Right? They pretty much offer the exact same thing – today they have evolved, but if you really look back to when they were founded, Uber positioned themselves as everyone's personal driver, right? It was elevated, it was chic, it was sophisticated. While Lyft positioned themselves as your friend picking you up – it was safe, it was friendly, it was fun. And so if they had both come out with the same positioning, they both would not have existed. So positioning also allows there to be multiple players in the market and ensure there's not any one player that is taking too much share.
AMIRAH: So what do you need to think about to get to that kind of positioning?
JONAH: The best positionings go beyond a functional description of what the business does and speak much more to an emotional benefit of what that product or service is going to allow somebody to do, allow them to be, allow them to feel. And what goes into a positioning is an understanding and a description of your target. The insight, the human truth that you're solving for. The product offering itself – what you functionally give people. And then the last piece of a brand positioning, which is the most important piece, is the emotional differentiating benefit.
AMIRAH JIWA: How do you go about figuring out what that big idea might be?
JONAH: What we like to do is really ensure that we are developing a positioning that's not just a description of the product – that feels unique for the category, and ultimately will be a positioning that reaches the largest group of people as possible.
There's a difference between demographics and psychographics. Right? Demographics are not the tool for developing a successful brand positioning. Demographics can be great when you get into the execution moment, when you're thinking about buying media, or thinking about a very specific targeted ad. But when you're developing a positioning, you want to think more about the psychographic. You want to think about the mindset. And you want to think about the beliefs and the behaviours around a group of people.
So I think the best way to dive deep in psychographics is by talking to people through qualitative research and insights. So that's everything from one-on-one conversations to focus groups. What you want to begin with is with the hypothesis of a group of people, and I think it's important to ensure you're talking to a range of people, that's not just any one age or any one gender or location, but rather a more representative group of folks. Through that, you want to begin to ask them questions about their life and what they believe and how they think about a certain category or what their routines might be around a certain category, what the best parts of a certain category might be or what they might have challenges around.
AMIRAH: What's an example of a brand that did just that using psychographics to reach a large audience?
DUNCAN: One of my favourite brand positionings is that of Airbnb. They position themselves all around this idea of belonging anywhere. And so they thought less about demographic and more about a psychographic – someone who thinks about travelling versus vacationing. And they entered a very, very crowded market, where it wasn't just about vacation rentals, they were entering the hospitality market. And they were able to steal share away from hotels and completely change the way that people think about travelling. I think if they had gone after just people who want to stay in people's houses, or just people who kind of liked that more nomadic lifestyle, they wouldn't have been able to catch the brand share that they were able to capture.
AMIRAH: Thanks to Meg, Marisa and Jonah for their valuable insights. They all mentioned the importance of talking to customers and user research. That's a topic we'll be covering here on Workshop soon. For now, here's Duncan with key takeaways on assessing a market's potential and building a positioning that could capture some of that market share.
DUNCAN: Number one – when you're starting a business or launching into a new category, you need to make sure you're solving a real problem or addressing an actual unmet need.
Number two – take a look at wider market trends to see if there is an opportunity. And remember not to be put off by lots of activity in the category.
Number three – if you are entering a crowded category, your brand positioning is what will help you stand out and attract customers.
And number four – think in terms of psychographics, not just demographics, when you're thinking about the people who may be interested in your product.
For a more detailed look at some of the things to consider when assessing a market and thinking about the role that you might play in it, check out our online guide to the topic at mailchimp.com/courier/workshop.
AMIRAH: And that wraps up today's show. If you have any ideas or feedback for us, get in touch at [email protected] and we'll be back with another edition of Workshop in two weeks. See you then.