Forgot your password?

Rocket DAO ecosystem

I won’t bother you…or how to win over the market leader

Friday, December 11, 2020

Everyone wants to discover the blue ocean — an innovative product or technology that has not yet existed in nature. The only problem is that it takes a lot of time and money to create such technologies, and the launch is one continuous risk as you never know if the market is ready?

Entering a stable market with stable demand and long-standing players is another thing. What should a young project do in this case? And should it even try to break into such a market? Check out the article for answers.

Startup Jedi

We talk to startups and investors, you get the value.

Atomic bomb explosion

That is how, back in 1981, French journalists dubbed the first Yohji Yamamoto show in Paris. It really was like a bolt from the blue: black rags all over, a complete absence of makeup, female bodies coiled in robes with a complete lack of gloss and no sign of anything that was considered high fashion and luxury. And although this collection caused a flurry of negative reviews and critical assessments, the challenge was thrown — the world of haute couture will never be the same again, and 1981 will go down in history as the birth date of conceptual or avant-garde fashion.

Everything is cyclical, everything has its beginning and its end, and each new era needs its own, new heroes — this is what this segment of the history of the fashion world teaches us. The fashion business, despite the seeming lack of seriousness, however, is one of the brightest and most vivid examples of great ups and downs. Also, the world of fashion, namely those of its long-livers who manage to stay afloat, demonstrate the wonders of business acrobatics, being a living example of successful economic models with their product diversification according to the theory of innovation diffusion. And if the fashion industry can teach us anything, it is how to enter an already established market and challenge its main players.

...

In the wake of contradictions

At first glance, the idea of ​​challenging the main player in the market, or even the whole industry, seems ridiculous and crazy. But take a closer look at the strongest sides of your opponent — and you will be surprised to find that every strength is also a weakness. In other words, every strength contains a contradiction that becomes a weak link in a mature company and can become a real competitive advantage for a young player.

how to win over the market leader

Sometimes there is too much money

Let’s start with the financial side of the issue. The financial well-being of the company, among other things creates a feeling of omnipotence, if not even a painful illusion of its own greatness and egocentrism. In practice, this leads to the fact that the company loses touch with reality, completely forgetting who the central link in the seller-buyer chain is. The team of such a company falls into the illusion that it is they who are the center of the universe, and all business processes are aimed at solving their own operational tasks, where the client is nothing more than “traffic”, which is assigned the role of extras carrying money to the cashier.

In spite of such an attitude towards the client, a young player should use a client-centric model, the essence of which boils down to the fact that your client is at the center of all business processes. That is, every action should be based on one simple idea, which is helping your customer get the best customer experience. It does not matter at all what kind of business processes we are talking about — be it advertising or logistics.

how to win over the market leader

Average product for average people

The next strength of the big player is everything for everyone. This is a kind of historical reality, when from the general mass of consumer goods, players were formed who acquired some sort of specialization. Today this approach is coming to an end, “everything for everyone” means only one thing: a solid gray mass, which, trying to please everyone, loses face and itself, and with it — the interest of consumers.

Again, this is a huge advantage for a beginner player, the main thing is not to be caught in the same trap as the market leader is trying to keep a foot in both camps. The theory of innovation diffusion will help to understand the issue; it explains the distribution and formation of demand for new information, goods and services.

According to the theory of innovation diffusion, society is divided into groups of consumers that have different levels of receptivity to novelty, which looks as follows: evangelicals — 2.5%, early followers — 13.5%, early majority — 34%, then later followers are also about 34% and finally lagging behind, their 16%.

What matters is that each market segment has its own evangelists and followers and laggards. For example, an IT professional is likely to be a technology evangelist but lagging behind in fashion, and vice versa.

The irony is that everyone wants to get into the early majority and bite off a big piece of the pie, but everyone ignores the fact of how demand is formed. The thing is that the early majority will not use a product or service until this product or service becomes safe and gains the status of mass. This can only be achieved through the formation and diffusion of demand, starting with the evangelists and moving towards the early followers.

Form a core target audience. According to diffusion theory, the ideal target audience includes evangelicals and early adopters, for a total of about 20% of buyers. This is your ideal target audience who buys your values, not the product : what you do and why you do it.

The next group of customers, with a total of about 30%, is the so-called early majority: those who buy your product from time to time because it is your product in a particular context that best solves a particular customer problem.

Thus, the entire go-to-market strategy boils down to two objectives. The first is creating value and communication to reinforce brand and company value. The second is the concept of JTBD (Jobs-To-Be-Done), the goal of which is to convey how a particular product or service will help in solving a client’s problems or help in achieving their goals and desires. Briefly, the essence of JTBD is as follows: the consumer occasionally hires your product just as long as the product does the job best.

how to win over the market leader

Bigger budgets, bigger troubles

In other words, anyone can succeed with money, which is quite difficult to argue, especially when looking at the modern style of advertising communication. No, really, looking at what is happening in the advertising industry, I understand only one thing: there is definitely no crisis in the market, at least in Russia. A huge amount of stupid ads that completely mediocrely drain huge digital budgets straight down the toilet — and all this is accompanied by loud statements about ROI and other avian metrics.

Meanwhile, according to the latest research by the digital communications agency Deloitte, there are between 400 and 10,000 advertising messages per day that each consumer gets. Each of these messages, merging with each other, turns into an information flow, which is perceived by our consciousness as an eternally noisy hive that causes only one reaction — brushing it off immediately and forgetting it like a bad dream. All this leads to the formation of defense mechanisms and the creation of new behavioral models. One of these forms of behavior is called “tunnel perception”. The essence of this behavioral reaction boils down to the fact that going online, a person concentrates exclusively on the goal they have, completely blocking extraneous signals, which negates any form of rational communication.

This phenomenon is called “choice under uncertainty”. It was these very uncertain conditions that served as the basis for the birth of behavioral economics and its applied direction — behavioral marketing.

The main idea of ​​the approach is that under uncertain conditions of choice, decisions are made by the first signaling system on an implicit, emotional level. In other words, the decision is first made by the emotional brain and only then is it recoding to the conscious, cognitive level.

This approach fundamentally changes the mechanisms of interaction with the client. Advertising, like any other communication, should contain 2 levels: emotional and rational. It is important to remember that the message should take into account which group of consumers you are reaching, evangelicals or early adopters, because their motives for consumption are very different. The task of communication is to choose the right means of conveying information: symbols, images, color codes and messages. This will become your undeniable competitive advantage.

how to win over the market leader

Recognition doesn’t mean strength

I recall the experience of a large company rebranding by an expensive Western agency. To my surprise this company is a federal-level player and its name is known to almost every resident of the country, but (!) even its top managers were unable to answer what the name means. This means that, despite enormous recognition, the name remains hollow: for all the years of the company’s existence, the name has not been filled with meaning. In other words, there is recognition, but there is no brand strength.

Brand strength isn’t just nice words. Today, thanks to affective neuroscience, brand strength is the value that is part of the decision equation. Remember that purchase decision = value — pain (I wrote this earlier in Apple’s Neurobiology of Success: How to Manage Consumer Behavior). In other words, brand value and strength is a competitive advantage that will have a critical impact on the final consumer decision about choosing a product or service. This is where the cornerstone of the life cycles of companies lies: some replace others precisely because the old are no longer valuable for new generations of consumers.

how to win over the market leader

How Jobs destroyed the cartel agreement

And it’s Jobs again, you thought. Well, yes … One of the key strengths of the market leader is the so-called cartel agreement, the power of influence on suppliers and various kinds of monopolies that block entry to the market for new players. This is what Jobs faced when he decided to release the first smartphone.

At that time, it was cellular providers who determined the type of mobile phones that were created to reflect the technical capabilities of cellular operators. After talking with the main players, Jobs realized that he was not going to get anything, but when did that stop the apple rebel? “It’s time for a revolution,” thought Steve and turned to a small local company that kept away from all more or less significant players. Incidentally, this was the same company the two Steves sold their idea to, known as the “blue box”.

So, teaming up with a weak but proud player, these two revolutionized the industry, breaking the monopoly of market leaders. The takeaway is: Look for allies who share your values, since it’s the key to a strong and reliable relationship that no money can give you.

...

I am not going to disturb you

Personal case: I am not going to disturb you

In 2015, I received an offer to lead the marketing of perfumery at Yohji Yamamoto. The condition of the project could be safely attributed to the zero phase. The thing is that for a long time the license for the production of perfumery products was in the portfolio of P&G, where the project ended up failing miserably, leaving tons of products that had to be sold at bargain prices behind. For almost 10 years, the production of perfumery products was stopped.

After lengthy negotiations, the license was restored, and a team from the UK which followed in the footsteps of P&G took over the business. I think you guessed what happened next. The next move was mine, I felt somewhat like a sapper, realizing that the brand has only one chance. What was needed was a strategy that would not only bring the brand back to the market, but also neutralize all previous negative experiences from both suppliers and buyers.

The global perfumery market is highly competitive to say the least. If there’s a good place to test the principles of behavioral economics, it is definitely here. After analyzing past launches and identifying key errors, I decided to proceed according to the above steps.

First of all, it was necessary to find out who the consumer was, thereby identifying the core of the ideal target audience. It is not difficult to guess that these are people who are familiar with the brand, are connoisseurs of its philosophy and the avant-garde trend in fashion, but at the same time, buying clothes for them is too expensive, and entry into the brand occurs through the purchase of perfumery products. Further diffusion into the mass segment could be carried out through the product elements: concept, positioning, bottle design, notes, special offers and communication.

It was also clear that it was necessary to attract attention at potential points of sale. The 1981 atomic bomb effect. The revolution in the world of perfumery was just what we needed!

Absolutely black packaging, with its design reminiscent of a pack of cigarettes that Yamamoto never parted with, imitation of hand seams — as a reference to manual labor, which, despite all economic indicators, is still used by the brand to support artisan labor in Japan. And the name is a name that destroyed all acceptable canons in the world of perfumery: “I am not going to disturb you”.

Then came the test with fire and glass, or rather, the decoration of the flacon. The thing is, according to the designer’s idea, the flacon should be dressed in asymmetrical clothing, which is typical for Yamamoto. But, as it turned out, from a technical point of view, it was impossible to implement on an industrial scale: literally all the suppliers of this industry refused us.

But then the same miracle happened, which has since been codenamed “the miracle of the blue box”. We met a company at one of the professional exhibitions that was engaged in the decoration of bottles of exclusive alcohol. They wanted to enter the perfumery market, and we wanted to realize our unique design. It was a desperate move, but the game was worth the candle in the end! Yet, the hardest thing awaited us, namely saving our commercial director from a heart attack, because he had no idea how to sell a product that violates all the rules of the perfume market.

The presentation of the fragrance took place in 2018 at an international exhibition in Singapore. By the way, there was no need to sell the fragrance: its appearance, concept and challenge were selling themselves. Today perfumery under the Yohji Yamamoto brand has a worldwide distribution and is presented in numerous specialized networks and boutiques of the brand.

...

Instead of conclusions

Success is a multi-variable equation. Self-confidence and perseverance, technologies, theories and tools are no less important than personal characteristics, because behind each of them is others’ trial and error. Use the experience of those who came before you, because only a fool learns from his mistakes, the smart one from strangers, and the wise one does not make them at all.

11 Dec 2020

 

Stay tuned and don’t forget to follow us:

Facebook: facebook.com/StartupJedi/

Telegram: t.me/Startup_Jedi

Twitter: twitter.com/startup_jedi

 

 

More From Startup Jedi