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Lessons from Quibi’s closure

Media streaming service Quibi closes - Your Startup Guru
Media streaming service Quibi closes

Media streaming service Quibi shutting down six months after launching. Their closure is not surprising because Jeffrey Katzenberg, the former Disney studio head and DreamWorks co-founder missed one important lessons when selling something new: make it familiar.

Katzenberg missed one important lessons when selling something new: make it familiar.
People were not going to shell out $5 per month to watch something they’ve never heard of with commercials.

In a previous post, we discussed how industrial designer and marketer Raymond Loewy created the concept of MAYA — Most Advanced Yet Acceptable. His firm designed mid-century icons like the Exxon logo, the Lucky Strike pack, the Greyhound bus, as well as Frigidaire ovens and Singer vacuum cleaners. Even the blue nose on Air Force One was his idea. Loewy had an uncanny sense of how to make things fashionable. He believed that a balance must be struck between two concepts: the curiosity about new things and a fear of anything too new. He said to sell something surprising, make it familiar; and to sell something novel, make it novel.

What is Quibi?

Quibi is a media streaming service that promised to reinvent television by streaming high-quality content in ten-minute-or-less episodes to “the TV in your pocket.” Quibi, is short for “quick bites.” Katzenberg believed enough mobile-phone users would use their spare minutes of downtime — while waiting in line for coffee, riding the bus or subway — to watch bite-sized episodes of premium, Hollywood-quality video.

The concept itself is great except all of their content was new and it cost $4.99 (with ads) or $7.99 (without ads) per month. People were not going to shell out $5 per month to watch something they’ve never heard of with commercials. Also, the short episodes might not be long enough to engage the audience. Ultimately, their revenue model did not match their pricing strategy (1, 2).

What Should Quibi Have Done?

Using Loewy’s lessons, in order to make the shows on Quibi familiar as well as its short format, they should have gone with the freemium model by giving one month free with an additional month if they get someone to join. This will give time for people to bond with the shows before introducing the paid no-commercial version. Hulu used this same pricing strategy and it worked out well for them.

According to Vulture article Is Anyone Watching Quibi?

Quibi was to launch in the spring of 2020 with 50 original shows, and another 125 were to be rolled out by the end of the first year. Recognizing the risk of making something for an unproven platform, Katzenberg typically offered to pay producers’ costs plus 20 percent. “People on Quibi have $100,000 a minute to make content,” Katzenberg tells me. “That doesn’t exist on other platforms.”

This production pace and cash burn is difficult to sustain and now, in a fire sale, they are giving out free 6 month trial memberships in an attempt to gain viewership but it was too little too late.

Pabst Blue Ribbon: Why hipsters found a beer that was cool before it was cool

Hipster and Pabst Blue Ribbon - Your Startup Guru
Hipster and Pabst Blue Ribbon

Pabst Blue Ribbon’s (or PBR) rise and fall is a story of a market finding a product — unfortunately, it 170 years for it to happen. PBR has been around for 170 years but only in 2008 enjoyed a 6 year boom in popularity (outside of a brief moment in the 1970s). If hipsters were around 170 years ago, it wouldn’t have taken one hundred seventy years for PBR to find popularity.

It is better to find an under-served market and create a product/service for them than wait for a market to find your product/service.

Hipsters are known for following the latest trends and fashions, while eschewing things regarded as being within the cultural mainstream. Hence the term, “I was into __________ before it was cool.”

So why did hipsters like PBR? To put it simply, it was “retro chic”, anti-mainstream, and with many people still trying to recover from an economic recession, Pabst Blue Ribbon’s low price point was an attractive option. This brings us to a tool in marketing used to find customer groups — psychographic segmentation.

What is Psychographic Segmentation for Business?

Psychographic segmentation is used in market research as a way to divide consumers into sub-groups based on shared psychological characteristics, including subconscious or conscious beliefs, motivations, and priorities to explain and predict consumer behavior. Any dimension can be used to segment a group of consumers such as style, variety, availability, price, etc.

Hipsters avoided things that were popular and some of them were not price sensitive so they were willing to consider a range of beers that occupied a certain psychographic zone.

Psychographic segmentation of hipster beer consumption - Your Startup Guru
Psychographic segmentation of hipster beer consumption

As PBR’s popularity grew, it was departing from the zone of consideration – the region of price and popularity where hipsters were willing purchase from. Also, as hipsterism became more mainstream, the association of PBR with hipsters caused a self-fueling downward cycle.

Shift in Pabst Blue Ribbon popularity caused hipster abandonment - Your Startup Guru
Shift in Pabst Blue Ribbon popularity caused hipster abandonment

How to Use Psychographic Segmentation for Business?

Since you don’t have over one hundred fifty years for your product or service to be found by a market, it is better to find an under-served market and create a product/service for them than wait for a market to find your product/service. You can read about more businesses that found a need and filled that need.

Your Startup Guru used psychographic analysis to differentiate our client’s brand from that of their competitors yet stay true to their envisioned identity:

swimsuit brand psychographic differentiation - Your Startup Guru
Swimsuit brand psychographic differentiation

How to Do Market Research for Business?

There are many sources at your disposal to gain a deeper insight into who your customers are and segments within that market.

  • Ask potential customers: Surveying is a form of primary market research. Ask them how they use their product, what they like/dislike about it. How long they have used it, is it expensive, how does it make them feel, etc. These questions will give you valuable insight on the psychology of the user.
  • Pose as a customer and visit your competitor’s store/website. Learn how they do what they do. See what they do well, what they can improve on. Sometimes employees are very happy to share details you cannot find anywhere else.
  • Industry and market research companies such as IBISWorld, Pew Research Center, Audience Overlap Tool, Statista are loaded with great information. The downside is that they can be expensive. Less expensive options include the SBA’s Office of Entrepreneurship, US Census data, and older reports/white papers.
  • Industry and trade publications for your particular sector are also a great source of information. Some are free while some require memberships.

So What Should Pabst Blue Ribbon Do?

Given that hipsterism is on the way out, a brand extension with Pabst [pick your color] Ribbon which is guerilla marketed to a new niche market segment such as Yuccies: Young Urban Creatives (that are a slice of Gen Y) with product placement on their YouTube channels is a viability…or wait another +100 years.


Contact us today to get started on market research that will help pinpoint your target market.

Lipstick on a pig and recession-proof businesses

Lipstick on a pig and recession-proof businesses - Your Startup Guru
Lipstick on a pig and recession-proof businesses – Your Startup Guru

Welp, there’s no need to put lipstick on a pig. Today’s GDP data released by the US Bureau of Economic Analysis showed that real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 5.0 percent.

Chart showing Real GDP: Percent change from preceding quarter

This is really bad news which means figuring out how to mitigate damage and making all adjustments by bootstrapping. Many businesses such as bookstores, farms, and clothing manufacturers pivoted their business models to adapt to the impact of COVID-19.

One thing I learned while working with my client KiloNiner several years ago is that pet products were largely recession-proof during the 2007-2009 recession. This is because people view their pets as family members so cutting back was avoided. There are many other businesses are that recession-proof as long as adjustments are made to accommodate social-distancing requirements:

  • Repair / maintenance services: People will still need their plumbing to work, their lights to turn on, and their car engines to run
  • Dry cleaning / laundry: Laundered clothing and materials will always be needed as long as people wear clothes and don’t have in-house machines. Dry cleaning for clothing might decline as formal wear is reduced but will not go away as people still wear jackets, etc. on occasion.
  • Professional services: Accountants, lawyers, and other administrative professionals still needed for the economy to run.
  • Funeral / Memorial services: A natural consequence of life is death. Particularly with the unsettlingly high mortality numbers associated with COVID-19, demand will likely be high for a very long time.

There are many more industries and even sectors/value-chain-links within floundering industries that are somewhat insulated from recessions. Your Startup Guru provides industry/market research as well as a wide range of other services for businesses to help navigate this turbulent economic climate. Contact us and let’s figure out a plan for you.

Old school business model

I just saw a commercial for Rent-A-Center and thought to myself that their old school business model is nearly a half center ahead of the times.

Founded in 1974, Rent-A-Center is an American public furniture and electronics rent-to-own company based in Plano, Texas. The company was incorporated in 1986 and as of 2014 operates approximately 2,972 company-owned stores in the United States, Canada, Puerto Rico and Mexico, accounting for approximately 35% of the rent-to-own market in the United States based on store count.

A convergence of trends—including the Mari Kondo-sparked enthusiasm for cleaning out closets, increased concern over the impact of climate change, and a movement toward smaller, urban apartments—has made millennial consumers more conscious of how many items they’re accumulating.

Rent the Runway CEO Jennifer Hyman.

As you may know, companies are taking a similar business model and expanding it to other consumer sectors such as clothing and jewelry. This model has already been applied to transportation with Lyft/taxis/vehicle leasing and with housing with AirBnB/hotels/apartments and intellectual property with game rentals/public libraries. Entering into the fray are companies like Rent the Runway, which rents unlimited designer styles to subscribers and Fat Llama, which rents electronics (in the UK).

A convergence of trends—including the Mari Kondo-sparked enthusiasm for cleaning out closets, increased concern over the impact of climate change, and a movement toward smaller, urban apartments—has made millennial consumers more conscious of how many items they’re accumulating, according to Rent the Runway CEO Jennifer Hyman.

The spending habits of millennials, the largest single consumer group out there with 83.1 million (a full quarter of the U.S. population), was surveyed. The survey found that the main reason why they rent is to “test things before purchasing” at 57%. This makes sense with money being tight and space being limited, every purchase has to be scrutinized. The results of the survey are shown in the infographic below:

World Economic Forum: This is how millennials are fueling the rental economy

Old school brands such as Play it Again Sports and Rent-A-Center are riding the boom of the change in consumer sentiment and behavior. Rent-A-Center’s revenue grew $9M between 2018 and 2019 to $2.6B, operating income balloon an astounding $197M between 2018 and 2019 to $253M, helping net income to increase by $165M to $173M.

SBA EIDL Application

The Emergency Economic Injury Disaster Loan (EIDL) application from the Small Business Administration is fairly straightforward.

If you need assistance in filling it out, please contact me today as funds are limited and applications are coming in quickly.

4/16/2020 UPDATE: A loan officer from the SBA called me today to let me know that they will send an email with a .gov link (https://covid19relief.sba.gov/#/ do NOT click on any other URL extensions as there are many scams out there). Once I clicked on that, I resubmitted the same application which then takes me to the approval process.

Adaptability is the most powerful trait

You have probably noticed the deluge of advertising that is targeted to the new reality of being at home. This is obviously a response to the global pandemic we are all being affected by. The following is a breakdown of what is happening and how your business can harness the post powerful trait: adaptability.

Adapt Through Marketing Strategy Marketing

Aired prior to the COVID-19 crisis but replayed recently Campbell’s realized that people are stockpiling canned food. Set to a wholesome and nostalgic soundtrack without pandering to panic buying, they capitalized on an opportunity to remind customers of a classic pairing. On a side note, the music choice was oddly relevant — Thank You For Being a Friend was the theme song to the ’80s sitcom The Golden Girls and the elderly are among the most vulnerable to COVID-19.

Also, more people are telecommuting and are realizing their home computers might not be suitable for work so Dell aired a commercial for one of their newest laptops. Peloton, home office chairs, etc. are all advertising the benefits of being healthy and productive at home. Also, mental health app Talkspace, Delta Airlines offering free flights for medical volunteers, online education, bidets, and more are using this opportunity to advertise their products and services.

Adapt by Seizing the Opportunity

Adaptability Charles Darwin - Your Startup Guru
Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0)

When disruptions happen, it is important to consider alternatives in order to adapt to the new environment. I have advised a new restaurant client to pivot their business model from a brick and mortar location to a commercial kitchen or food truck and adjusted their ad hoc financial projection model to reflect the pivot. Of course, depending on the stage of a business pivoting to a commercial kitchen or truck is not an option; which is why I always provide tailored consultations to each client.

Many people have a lot of downtime now with not having to go into work. It is a good time to take a break from watching the news and start mapping out the idea that you’ve been mulling. Who is your target market? Where will you be located? What are your startup costs? These are all questions you should know the answers to or be actively seeking if you are serious about taking the next step. If you do not know the answers or want a second opinion on, I always provide free consultation so send me an email. Afterwards, those pushup challenges on social media are also a good healthy distraction too from all the dire news.

These are better practices than gouging prices like that hand sanitizer guy.

sanitizer price gouging guy

A win-win situation


9 times out of 10 I create for my clients a risk-adverse, slow growth, manageable startup strategy to minimize downside risk.

Contact me and let’s create a win-win plan for your company.

Another happy client

Businesses face difficult decisions every day about what direction to go.  I was fortunate enough to help Eskenazi Health with a strategy analysis that involved an opportunity cost analysis and risk matrix to help their form their decision.
eskenazi healthEskenazi Health is a comprehensive safety-net public health system with an acute-care hospital, a network of primary care centers, mental health services, community education programs, and many other services. Located in downtown Indianapolis, Eskenazi Health’s mission is to advocate, care, teach, and serve with special emphasis on the vulnerable populations of Marion County.

See a need, fill a need

bigweld

Often entrepreneurs come up with their business idea because of their own personal experiences or that of someone in their circle of friends & family.  This is a great strategy but sometimes doesn’t tap into a market large enough.

In episode #850 of Planet Money, The Fake Review Hunter the hosts interview Tommy Noonan, creator of SupplementReviews.com.  SupplementReviews.com is a highly popular website that provides unbiased user reviews of health supplements.  However, Tommy soon found that there were reviews that were suspiciously positive.  Because Tommy’s entire website was based on authentic user reviews, fake reviews became an existential threat.  After a lot of research, he found that some of these reviews were being written by the supplement companies themselves.  He uncovered so many fake reviews that he started noticing a pattern; almost like a modus operandi.  They were often single product/brand reviews, used fake pictures, lots of reviews in a short period of time, and/or only had one review.  Sometimes the “reviewer” would give positive reviews for one brand and negative ones to competing brands.

This is when Tommy had his a-ha moment.  If his website had fake reviews, others would also probably have them too.  So he created another business that aligned with one of the juggernauts of the internet, Amazon.  Tommy’s site which uncovers fake reviews is called ReviewMeta.com.

 

How to find a need

As mentioned at the top of the post, most rely only on their personal experiences or that within their network.  Sometimes the need is obvious.  For example, at a 7-Eleven in Shirley, New York one 7-Eleven sells more coffees than any other franchise in the US; all because of one store manager than knows virtually every customer’s name and greats them.  No special location mojo or customer flow algorithm, just old fashioned customer service. You can read more about it in my post Competitive Advantage and Coffee.

Other times it is not that obvious.  In that case, you have to hustle in a different manner.   How do you do more “work” when you’re already working to the bone?  Find efficiencies:  know your customers, know your competitors, lower your expenses,  by working to learn more doing more research in episode #700 of Planet Money, Peanuts and Cracker Jack.  In Boston’s Fenway Park, Jose Magrass is the top seller.  One year, on opening day he sold 500 hot dogs, $2750 worth of hot dogs in a single game.  In fact, Jose has been the top seller for over 5 years.  Part of his secret?  He has a spreadsheet where he analyzes many factors beyond just the weather such as what his competing vendors are selling and what fans are likely to purchase depending on the price of their seats.  For example, behind home plate diet coke sold better because possibly that is where the “vain people” sit.  That kind of analysis is impressive.

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