Vatsal Gupta: B2C is hard

I am the ideal customer for all consumer companies. I will buy anything that solves my problem (that I apparently did not know I had 🤷‍♂️), has a good packaging, attention to small detail, and a somewhat believable story. I will also then proceed to tell all my friends about this cool new thing.

I often see promising brands dwindle away because they could not replicate the small initial success. Inherently, consumer products are not commutative in nature: one can trick ten people once, but it’s much harder to trick one person ten times. It is not entirely their fault too, business cycles have also become shorter and technology has enabled rapid proliferation of competitors. The barriers to entry have been replaced by barriers to scale. Rarely does a company come along who consistently puts out products that their audience cannot stop consuming. But when it does, it creates immense value for all their stakeholders.

From my limited knowledge, I have tried to compile a set of observations on building brands and creating that magic potion:

An entreprenuer must be concerned with the unchanging man – what compulsions drive him, what instincts dominate his every action, even though his language too often camouflages what really motivates him. Yes, Jeff Bezos said this first. MSCHF is a new age company which has demonstrated that this works. They worked with the mattress company Casper to build a simple website that would help you fake a social life on Snapchat so that you could relax in your bed instead of going out. Second time over, they developed a chatbot that was capable of a personalised text conversation between 11pm and 5am - everyone loves pillow talk.
Is the product a solution looking for a problem or is it an aswer to a problem looking for a solution? A lot of effort, time and money would be saved if the entreprenuer and the investor honestly answered this question.
It would be helpful to first segment the customer and not the market. Segmenting a market is somewhat problematic because market segments are ultimately artificial constructs based on what companies think are consumer segments. Focus on the customer and not the competitor.
Most new brands do not stand a chance because they were introduced to serve a market rather than create a market. Think of evolution of brands as the evolution of species - divergence will create resilience. From the theories of Clayton Christensen and Peter Thiel we know that innovation only happens on the fringes. Taking this a bit further, Sudhir Sitapati, the ex-CEO of Hindustan Unilever, explains: "counter-intuitively, it is easier to grow a category than it is to grow a brand. This is because an under-penetrated category represents an unsolved consumer problem (assuming the category solves a problem in the first place!) while growing brand penetration in an already penetrated category means nudging out a competitor who has more or less solved the problem. Of course, one should attempt to grow a category only if one is the market leader; otherwise the fruits of your labour will land in the lap of a competitor..... In summary it is easiest to get non-users of a category to adopt the category (get chai users to drink green tea) and it is the toughest to get heavy users of a brand to consume more of it (drink four cups of Brooke Bond Red Label every day rather than two)."
Rajiv Bajaj used the teachings of Al and Laura Ries and launched the Pulsar in 2002 and every successive model. He has laid out the entire Bajaj Auto product ideation playbook, and these are 9 criteria they try to answer:
On pricing the product, the most insightful learning for me came from Rama Bijapurkar, "Those with money are thrifty, those without splurge". This explains the extremely liquid used iPhone market in India. Sitapati goes on to expand on this, "pricing never drives penetration or attracts new users. New users adopt a brand for three reasons: access, awareness and availability. The amount they consume has to do with their satisfaction with product quality and price. Lowering and increasing price changes consumption and not the recruitment of new users."
Get creative with distribution. Please do not start off by paying rent to Facebook and Google.
Brand extensions do not work, there just isn't enough mind space for a new association. The harsh truth is that you have to let your loyal customers go when they start expecting new product categories. If you are lucky your extension will fail but if you are unlucky it may succeed and destroy the mother ship. A second product in the same category should be as far away from the first one as possible. Royal Enfield executed this beautifully when they launched the Himalayan when they were market leaders with the Bullet.
And lastly, it sometimes pays to abandon logic when everyone else is being logical. If all CPG brands are now on Instagram and use pastel colors and beautiful backgrounds to promote their posts, it would be a good idea to approach this medium through the lens of brutalist design. Don't believe me? Check out Poolside.fm. Even Vijay Shekar Sharma found it super cool. Counter positioninng, if executed well, can become a super power.

At the end of the day, all business participants should realise that, "the circumstances of our life may actually matter less to our happiness than the sense of control we feel over our lives". Use pscho-logic.

Notes:

Monday, 1 June 2020

B2C is hard