Back to discussing market fit.
One a day keeps bankruptcy at bay
I have a paid subscription to The Ken. They produce just one article a day and they have just 30,000 subscribers. Most advertisers -even niche B2B ones – tend to be very snooty about numbers below 100K. But it isn’t always about how many you reach as who they are, right? That’s the entire premise of the new digital-first brands, that they can address ever tinier niches. This is because digital allows you to build very fine-tuned awareness, e-commerce allows you to access most parts of the country, and digital CRM and analytics allow you to cross-sell, upsell and retain every customer uniquely.
At least that’s the theory.
Snail cream, anyone?
There’s a boatload of fashion, beauty, financial and health brands that promise to understand you better than the older mass-market brands. They use this understanding to create products and solutions that are ideal for you, your skin, your hair, your cold, your fever, your financial risk – you get the picture. Their success depends on reaching the right audience, understanding this audience as individuals, selling and delivering to this audience, and of course, eventually being profitable doing this.
Now imagine that I discover that snail secretions are great as a face moisturiser. I sell a 75 ml pack for Rs 2000. Is there a market for it? The Mizon brand has 5000 reviews globally on Amazon. Cosrx has around 12,000. (No snails are harmed in the process apparently.) Now we can either go “wow, 17,000 people bought snail slime on Amazon” or “how do we make money from just 17,000 customers”. And that’s the difference.
If you are addressing the long tail you need to know how to make profits on smaller numbers. Cosrx snail cream sells for Rs 1400 on Nykaa.com
and has 947 ratings. But hey you can buy a Nykaa brand snail cream sheet mask for just Rs 100, and if you buy 5 it’s half price! Woohoo! Unsurprisingly this product has 160,699 ratings!
Scale on Sale
VC funds invest for scale mostly. India is indeed a large country with billions of potential consumers. But our wealth is a tad concentrated – the top 1% own 33% of our wealth! That’s around 11 million people (or minus a few million after Gautam and Mukesh take their share). If you make more than Rs 25K a month you’re in India’s top 10% of earners! Now we can argue the numbers but essentially the market for many products is limited to this lot.
So here’s how I think D2C brands particularly in beauty and apparel will pan out. They will identify an underserved niche. They will target this niche with a premium product. The successful ones will then find a way to scale this -at a lower price – to the mass customer in order to make scale viable. But the vast majority will see their product idea adapted/adopted by the scale leader (like Nykaa). The lucky ones will be acquired by a scale leader and assimilated into the organization.
What about purely digital products? Those that can be delivered and consumed digitally. Definitely these are easier and more so if they address the audience beyond the toppers. Here the differentiator is not in the use of exotic snail mucin but -drum roll – design! Yes! When I was researching for India’s top UI/UX designers, folks in my marketing community, not so tongue-in-cheek, said “the ones in CRED”. And it’s true – it is so much easier to use CRED than any other banking or credit card app.
I don’t know how and when CRED will be profitable, so let me talk about another example. Zerodha. The brothers Kamath have essentially made a fortune by providing a demat account that is easy to use. Good design is good business. Their numbers? 9 million users (90 Lakhs) who control 15% of India’s trading volumes. (Angel Broking, a full service broker has 3.6 million users.)
What about MFine
Brands, regardless of the size of their target audience, have to address the following issues:
1. No awareness
2. No interest
3. No need
4. No money
5. No hurry
Today’s newsletter is all about the numbers. There is no right or wrong size of market as long as your business model is geared for it. Many of the implosions we are seeing is because there is a mismatch of expectations in the size of market that is interested in the product, can afford it and wants it today. Mfine claimed 7 million users in a Yourstory story on April 1 – maybe that was not enough to cover the cost of operations. The CTO also said that less than 10% of ailments require a visit to the doctor and the rest can be diagnosed at home. Yes, we’ve all come back from doctor’s visits relieved that all that was required was an iron pill or vitamin D, but would we be as satisfied if we got that answer from a machine? Healthcare is an area where trust matters and we are still at the stage where medical professionals and patients are moving to both digital diagnostics and digital trust. I’m very comfortable doing preventive check-ups remotely but not so much if I actually feel ill.
Kourtney’s Friends With Benefits
Continuing with the numbers – I must share my take on the most exciting marketing event that popped up on my NYT subscription! Dolce & Gabbana did a brand takeover of Kourtney Kardashian and Travis Barker’s wedding. Ok, ok, it wasn’t a brand takeover – D&G insists that they merely “hosted” the ceremony. They got oodles and oodles of media coverage in return – estimated at around $47 million by Launchmetrics – thanks to the 1.2 billion following enjoyed by the Kardashian clan. I count on the teen daughter to keep me posted all things Kardashian, and she had dutifully updated me on the actual marriage. What she did not know was that it was being hosted by D&G! A clear case of the celeb overpowering the brand. On the other hand, D&G was basically allowing them access to their own properties – yacht and castle
An influencer is not someone who has a million followers. It is a person who can influence the purchase decision of a million people. There is a rather big difference between the two. The first one is a celebrity, the second one an influencer. Celebrities can help get you from steps 1 to 4. Influencers can help you jump across all 5 hurdles.
What do the rich really want?
Needless to say they want easy ways to grow their money and spend it. Maybe some designer wear and bling. Possibly a yacht and a little plane – just to avoid the possibility of COVID on public transport, you know. But after that housing, education and childcare
are their biggest interests. Aim your startup at these spots and you have a winner! (Alternatively you can target the other 1 billion with practical products in these same spaces and change lives as well as build a volume business.)
What’s the takeaway for you?
Revisit your target audience and then ensure that you are walking the right ones through the five steps.
Don’t run a brand or a business? Of course you do! We all manage our own, personal brands and that follows this too.
Have a great week!