NPR’s How I Built This is a fantastic podcast that brings the stories behind some of the world’s best-known companies. How I Built This interviews innovators, entrepreneurs and idealists about the movements they built.
Peloton co-founder: John Foley
In this episode, they interview John Foley, one of the co-founders of Peloton; the fitness and media company that you’ve probably seen commercials for.
In the interview, they greatly undervalued John Foley’s network and experience but nonetheless, this episode touched on several relevant topics my clients often face. I picked this episode because it was a little more in-depth and enlightening than other episodes in that Foley he talks about:
having the discussion with this wife about moving in with her parents if the company fails,
how everyone is similarly able including Harvard MBAs,
how Peloton is only recently profitable after 7 years
There are also great questions asked by interviewer that touches on market trends such as arcades no longer thriving due to user experience-to-price dynamics (i.e. video game consoles vs arcades due to quality of experience), penetration/awareness strategy which led to their distribution model given that malls are making an industry correction, and lastly the trademark question: “How much of this was because of your intelligence and hard work, and how much of this was just luck?”
FYI, I always discuss market and industry trends, launch and penetration strategy, as well as bootstrapping in all my business plans.
According to data from the Census Bureau and IRS the average age of successful business founders is 42; so the 20 year old entrepreneur is a true rarity.
The team looked at data around the 2.7 million people who founded businesses between 2007-14 and went on to hire at least one employee. Along with average entrepreneur age, they also learned those new ventures with the highest growth had an average founder age of 45.
The researchers broke out the data into high-tech employment, VC-backed firms, and patenting firms. Across the entire United States, the average founder ages were 43, 42, and 45, respectively for those divisions.
Part of this reason is because experience, social capital, skill sets, etc. play a large factor in the success of a business. So even if you’re over 40, roughly 50% of successful entrepreneurs are above that age.
Fast fashion’s continued domination in addition to the popularity of yoga pants/leggings has helped finish a 15 year run.
Consumer purchasing habits have changed due to the great recession. However as consumer spending has increased with the improved economy, tastes have changed.
But that growth has reversed in recent years. Sales of super premium jeans — brands like 7 For All Mankind, True Religion, Joe’s Jeans and Hudson — fell 8 per cent last year, according to market research firm Euromonitor International. Overall, jeans sales grew slightly in 2016 after two years of declines, as Americans traded down to lower-priced brands like Levi’s, H&M and Forever 21.
Instead, buys are increasingly filling their closets with yoga pants and leggings, which they’re wearing not just to the gym, but also to run errands and meet up with friends. True Religion’s $319 skinny jeans have been replaced by Lululemon’s $98 yoga pants.
It’s summer and festival season is here. Events are big business with over 87 million people attending trade shows, conventions, & conferences; while 32 million people attend music festival. Some annual industry and market stats:
Events are targeted. So attendees are in your market, many in your target market. Renting a booth, depending on the event, can be fairly inexpensive. This is an economical means of raising awareness for your product/service for the following reasons:
You are not locked into a commercial lease contract
Can test the viability of your product/service
Get targeted market feedback
Some of what you may need depending on the event:
Mobile merchant services such as Square
Email collection method
Banners and booth appeal
Or compelling marketing materials (videos, images, samples) of your product/service.
Question: How should new products/services be created?
A) Make a novel untested product/service then find customers for the product/service?
B) Find a group of customers, find one of that group’s unmet need, then create a product/service to address than unmet need?
Reason: The development process of the product/service will take time irregardless of choice A or B. However, with choice B, the likelihood or having to rework the product/service to make it more closely meet the needs of the target market is lower. Also, with choice B, you have a better idea of the size of the target market. Having a market large enough to grow your business is very important. More on that below.
A great example of choice B is Girls Auto Clinic. Girls Auto Clinic is a brilliant combination of female-focused auto repair shop and salon.
Founder Patrice Banks felt what many of us feel when car issues come up:
“I felt like an auto-airhead. I hated all my experiences going in for an oil change, being upsold all the time for an air filter,’ she said. “Any time a dashboard light came on, I panicked.” – Patrice Banks, Girls Auto Clinic Founder
Of course many people come up with business ideas like how Patrice did: through personal experience. However, where most people fail is that their own experience might be too niche. In other words, the market might be too small. How do you know if your market is too niche? Market research. Market research is a process of analyzing factors such as demographics, purchasing habits, direct and indirect competitors, macro and microeconomics, and other elements. As much art as science, thorough market research is a critical step before moving forward with any concept.
Market research is one of the many services I offer at the most competitive prices in the industry. Contact me and let’s find your niche for your new business.
According to a new Credit Suisse report, up to 25% of U.S. shopping malls may close in the next five years.
What are the reasons? Of course Amazon and online shopping is a major reason. However, another factor is mall overexpansion. Currently there around 1,200 malls in the US. Between 1970 and 2015, the number malls grew more than twice as fast as the population. As such, it is predicted that within the next 10 years, that number will decline to 900.
Of course brick-and-mortar retail stores will never completely disappear because of the needs listed above and because of the fact that humans are social by nature. Just the type and make-up of retail stores will change. Possibly pop-up stores (a strategy utilized with great effect by Halloween stores) will become more common?
What to do with vacant buildings? That’s a lot of land that could be used for other use. Maybe mall owners will lower their rental rates. In some areas of Manhattan, retail rents have declined 10-15%.
More housing? Closures from major chains like Macy’s and J.C. Penney are pouring up to 37 million square feet of space back into the market. That could reduce some housing costs. Although, generally more expensive housing markets have greater discretionary spending which is often used for shopping. Also, the time and cost to demolish existing structures, rezone, and rebuild into residential properties along with its infrastructural linkages is not insignificant.
Some mall owners have indicated that vacant properties will be renovated and updated in efforts to attract new tenants and raise rental rates.
What to do?
Who knows that the future will bring but keep in mind that juggernauts like Walmart, Macy’s, and Sears are affected. So starting a service or online store that doesn’t compete with what Amazon sells is a safer option. Brand your own product (e.g. Bonobo, Dollar Shave Club) and controlling your own distribution is another option (of course be aware of knock-offs). B2B businesses (e.g. no one buys industrial components at malls) is insulated from mall closures.
Services such as dentistry, restaurants, car mechanics, large difficult-to-ship products such as mattresses, etc. will remain (so far) an insulated industry.
Analyses such as what I have done above is a small and cursory part of the industry/market analysis and strategy consulting services I provide to clients.
Small Business Saturday saw a record 112 million shoppers this year, setting a new record for the retail event. This was a 13% increase over last year’s SBS.
Part of this increase is greater awareness with 72 percent of U.S. consumers now know about Small Business Saturday. That’s a slight uptick from the 70 percent in 2015. Additionally, almost nine in 10 Americans view small businesses favorably, according to a poll conducted on behalf of the Public Affairs Council.
When selling something as ubiquitous as water, differentiation from your competitors is key. How do you differentiate? One way is through the right marketing mix. The marketing mix is comprised of: Product, Promotion, Price, and Placement. Also known as the 4 P’s of Marketing.
Product: Of course it’s not just water. There is value added features, such as electrolytes, flavors, caffeine, anti-oxidising manganese, etc. that companies are emphasizing to differentiate their product from the competition.
There was Life, Volvic, Ugly, Sibberi (birch or maple), Plenish, What A Melon watermelon water, Vita Coco, Coco Pro, Coco Zumi, Chi 100% Pure Coconut Water, Rebel Kitchen Coconut Water and coconut water straight from the nut (“you have to make the hole yourself”, explained a shop assistant). Also: an electrolyte-enhanced water pledging to hydrate you with 40% less fluid than ordinary water (Overly Fitness), a birch water offering “a natural source of anti-oxidising manganese” (Tapped) and an alternative birch water promising to “eliminate cellulite” (Buddha). There was also a “water bar” – a tap in the corner of the shop – that, according to the large sign hanging from the ceiling, offered, for free, the “cleanest drinking water on the planet”, thanks to a four-stage process conducted by a “reverse osmosis deionising water filter”.
You can read more about the concept of “product” from a marketing standpoint in my post about the failed McPizza.
Price: Another way to differentiate yourself from the crowd is by pricing your product/service at a rate that is considerably higher than your competition. How about a $100,000 bottle of water?
This self-proclaimed “champagne of waters” quickly won FoodBev Media’s Beverage Innovation award for the “World’s Best Still or Sparkling Water”. A case of 24 500ml bottles is $72, while a bottle from the “Luxury Collection, Diamond Edition” will cost you $100,000. It has a white gold cap set with more than 850 white and black diamonds and holds the profoundly questionable honour of being the world’s most expensive bottle of water. If you buy it, Riese will present the bottle to you in person at a private water tasting anywhere in the world.
Promotion: Promotion goes beyond just advertising. What do you communicate? Once you’ve exhausted the typical “it’s delicious!” “it’s cool!” “it’s a great value!” You can go into educating the market about the process, the people, the ingredients, etc. that goes into your product/service. It might be the same things as your competitors, but if you say you “add double the standard amount of X” while your competitors just say “they’re delicious!” then your market might assume your competitor does not add double the amount of X.
Fiji water, for example, contains 210mg TDS, including 18mg sodium, 13mg magnesium and 18mg calcium. (Fiji appears to have pulled off some fairly heavy-duty trademarking, including “Untouched by man™” and “Earth’s finest water™”.) Compare those numbers to San Pellegrino, which contains quadruple the TDS, at 925mg, including 33.6mg sodium, 53.8mg magnesium and 178mg calcium. Fiji, with far fewer solids, tastes smoother, while the San Pellegrino is bolder, saltier and naturally fizzy.
Melted iceberg essentially has no taste, having the lowest TDS (9mg) of any water on earth. It is like the ur-water, the water that pre-dates all other waters. “This is your starting point,” said Leonard, gravely. “Your baseline.”
Surprising right? Now tell me you’re not at least a little curious as to how the various waters taste. If the marketers did their jobs right, you might at least be open to trying the product once.
Placement: Placement mainly deals with distribution. Which is, where does your customer purchase your product/service. You’re not going to sell a $10 bottle of water at a gas station. You have to sell your product/service at where your market is. They are upper-middle class, baby boomers living in Massachusetts? Distributing through Whole Foods or Wegmans is a start, if you can meet their supply chain management requirements.
The dress code of the clientele in Planet Organic, Notting Hill is gym chic. On a hot day in mid-August, the men wore mid-thigh shorts, pectoral-enhancing vests, neon Nikes; the women were in black leggings and intricate ensembles of sports bras and cross-strapped Lycra. They had all either just worked out, were about to work out, or wanted to look as if working out was a constant possibility.
They examined the shelves. As well as the usual selection of kale crackers and paleo egg protein boosters, there were promises of wizardry, such as a packet of Alchemy Organic Super Blend Energy Elixir (£40 for 300g of powder). But never mind the food. Life, in 2016, is liquid. Opposite a display of untouched pastries and assorted bread products (who, in Planet Organic in Notting Hill, still eats bread?), were the waters.
The marketing of bottled water is pretty amazing amazing. Some is ridiculous snake-oil shilling. Some may have benefits, depending on the needs of the individual, that regular water cannot meet. Nonetheless, it is a $5 billion dollar industry in the US that is projected to grow 5-6% over the next five years.
A lot of my clients want a marketing strategy that involves internet marketing. Usually just online advertising is fine, but to more fully utilize the tools available to a small business, an internet marketing component should be part of a marketing strategy.
Internet marketing sounds straight forward enough and to some degree it is. However, it can get quite confusing when one goes beyond simple advertising on one website. Mix in compensation methods, market segmentation, success metrics, etc. then it gets fairly complex. As such, I put together an overview of internet marketing.
This post is a 30,000 foot outline of internet marketing (online advertising). As such, it is just an overview and not meant for detailed explanation. Each concept can be more deeply studied.Some of the terms are interrelated, meaning they are not mutually exclusive and can be blended with one another. Please keep in mind, marketing =/= advertising, although the two terms are frequently interchanged advertising is a component of marketing. Therefore, some of the concepts are more directed about marketing the company and/or product rather than just advertising.
This overview is pretty broad so skip to the end to find out what you as an entrepreneur/small business owner can do to utilize internet marketing for your company. The first two sections are: Delivery methods and Compensation methods
Display advertising: This is the most common and probably what everyone is most familiar with. The process can be straight forward or quite complicated.
Example: Pretty much every website you’ve ever visited.
Related: Web banner advertising, frame ad (i.e. traditional banner), pop-ups/pop-unders, floating ad, expanding ad, trick banners, news feed ads
Display advertising process overview: This is where the real difference between traditional vs. online advertising is seen. In traditional (and simple online) cases, the advertiser contracts with the website publisher and the ad is displayed. This is hardly done anymore beyond small relatively unknown websites. In a more complex case, the advertiser hires a marketing firm that might handle everything including content creation and placement (this is not the case many small startups face. Scroll down to the end for actionable info). The component that separates online advertising with traditional real-world advertising is the real-time bidding process at an ad exchange. An ad exchange is a platform that facilitates the buying and selling of media advertising inventory from multiple ad networks. Prices for the inventory are determined through bidding. The approach is technology-driven as opposed to the historical approach of negotiating price on media inventory.
General diagram of the display advertising processSource: Wikipedia – Ad exchange
Ad network: An online ad network is a company that connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand. The fundamental difference between traditional media ad networks and online ad networks is that online ad networks use a central ad server to deliver advertisements to consumers, which enables targeting, tracking and reporting of impressions in ways not possible with analog media alternatives.
Interstitial: Ads that appear before the main content of the site is loaded. Kind of like a pop-up, but the ad appears in the same window instead of a new window.
Example: Bvlgari’s ad on Forbes
Related: Text ads
Search engine marketing: You type in ‘auto mechanic’ and the first search result that comes up is a doctor’s office, usually near you. This isn’t necessarily an “advertisement” (remember marketing =/= advertising) but it brings awareness of the business to the customer by displaying it in a list of other auto mechanics. What rank it shows up on a search engine’s result is a mixture of keywords, backlinks, tags, page titles, daily bidding budget, etc.
Example: Google Adwords, Bing/Yahoo Ads
Related: Search ads, SEO, sponsored search
Social media marketing: Advertising on…social media! Each platform has their own pricing, terms and conditions. However, their reach is expansive and consistent. Facebook, for example charges as little as $5 per day and you can choose your target market, key words, photos, etc. I wouldn’t recommend social media marketing for startup B2B companies, but a great resource for businesses in other sectors.
Email advertising: Often synonymous with spam. Success is mixed but a resource to consider. Unsolicited emails are not encouraged unless you are very sure the target is receptive to your product/service. However, if the recipient is a former customer, it is a great and direct method of communicating deals, specials, updates, etc. You can easily create your own email list or hire email marketing companies such as Constant Contact to do this.
Online classified advertising: Online classified are relatively inexpensive but less targeted. An engaging headline, attractive photos (if attachments are allowed), and a persuasive yet succinct text body are essential for success with this advertising channel. This is not a suitable advertising channel for high-end/luxury brands’ products/services.
Example: Craigslist, eBay Classifieds
Affiliate marketing: Sometimes called lead generation, affiliate marketing is when advertisers organize a 3rd party to generate potential customers for them. Third-party affiliates receive payment based on sales generated through their promotions. The affiliate earns a commission when the visitor completes a desired action such as a link click, email submission, filling out an online form, completing an online purchase, etc.
Example: Product review blogs
Related: Affiliate network, CPM, CPC, CPA
Content marketing: An article, video, how-to-guides, quizzes, etc. (i.e. content) that is meant to market a product or business. This can be a relatively expensive strategy suited for more established companies. Companies can hire “brand journalists” to write articles about a wide range of subjects relevant to their company. The articles I post on this website is a very simple version of content marketing.
Native advertising: A type of “disguised” advertising that matches the form and function of the platform upon which it appears. In many cases, it is displayed as either an article or video, produced by an advertiser with the specific intent to promote a product. The word “native” refers to the similarity of the content with the other media that appears on the website. The post the link takes you can be the company’s page or an article discussed in the Content Marketing section above.
Online marketing platform: This is software designed to help manage all of your marketing in one platform. Your marketing manager or hired marketing firm will most likely utilize software of this sort. As a startup, depending on your marketing strategy, using an online marketing platform is probably not necessary.
Due to the accurate data on views, various types of multimedia, and other metrics that digital advertising allows for over traditional channels, several compensation methods have come into favor in the industry. Furthermore, because advertisers can track action online (unlike if a radio advertisement has been heard or a TV commercial seen) compensation methods is largely separated into impression and action.
Cost per mille (CPM): With this impression method, advertisers pay for every thousand displays (a.k.a impressions) to potential customers.
Cost per click (CPC): Advertisers pay each time a user clicks on the ad/link with this action method. CPC is recommended as a compensation method if you want the customer to visit your site. If your goal is just to build awareness of your company then CPM is recommended. CPC is growing in popularity though, with two-thirds of all online advertising compensation methods being CPC. One concern with CPC is accidental clicks. Thus, click rates using CPC has to be lowered to account for accidental clicks.
Cost per engagement (CPE): This action method aims to track not just an impression but if the viewer interacted with the ad.
Cost per view (CPV): This is mainly for video advertisements and is appropriately the primary benchmark used in YouTube ad campaigns.
Fixed cost: This is the most straightforward and arguably the most cost (in)effective compensation method. This is mainly time duration dependent and as such the cost is measured in cost per day (CPD).
There are other, less common methods as well as hybrid methods but as a startup it is unlikely you will see them.
Wow this is great and all, so how do you as a small business owner use this to advertise online?
It’s pretty straight forward: Search engine marketing (Google Adwords and Bing Ads) and Social media (typically Facebook). If you do that you’ll probably be ok and have most of your bases covered. The trick is getting your demographics, budget, and keywords on point. Internet marketing is an art that almost anyone can do but takes a skilled professional to do well.
All my business plans come with a basic marketing plan which can be expanded into a full fledged marketing plan that breaks down a company’s full marketing mix including branding, timing, advertising channels, pricing, and more.