How are companies launching and scaling with general audiences?

Takeaway

  • Building for a general audience often requires companies to look beyond the coastal cities they are most familiar with. This means building for the 99%, not just the 1%.
  • Quidsi and Hollar, which target the general population, have grown by focusing on universal pain points that impact people regardless of location, which legacy brands ignored.
  • While going after a mass audience works for some time, eventually these companies need to segment their audience into niches and serve them differently.

Case Studies

Hollar, Amazon Prime, Diapers.com & Jet.com, Hilton, CB2, JCPenney, Sephora.

This is Part I of a two-part series on starting and growing brands through general and niche audiences.

Brands usually start by targeting a niche or mass audience. One is not better than the other, but each has trade-offs.

A niche audience is small and specialized. Catering to a niche gives a brand the opportunity to learn an immense amount of information by maintaining a personal connection with its customers. However, a niche brand’s potential scale is not always clear.

A general audience is large and broad. This might give brands less actionable information about each customer, but the potential scale makes up for the shallow amount of data. The path to reaching massive scale, however, is not always clear.

Because the Internet has transformed the ways in which brands can launch and grow, democratizing access to both general and niche audiences, what type of audience should brands start with?

This piece focuses on general audiences, specifically:

  1. How can companies start by going after general audiences?
  2. How can companies targeting mass audiences drive growth by serving new niches?

Starting with general audiences

General audiences gravitate towards brands with accessible products that provide wide-ranging value. If the product adds some marginal value—it’s a cheaper alternative or improves the experience—it has a solid chance of succeeding.

Thinking of consumers as one large group changes the strategy around a company, who must then think of its business model more broadly. Like pop songs and box-office hits, going after a general audience provides an opportunity to capitalize on the commonalities of a large population, giving a brand the opportunity to scale.

Building for the 99%

In the US specifically, the biggest audiences are not in the coastal cities (from which founders and VC’s tend to hail). Some call the targeting of these large audiences building for the 99%, not the 1%.

Hollar

Hollar, an online dollar store, started off by capturing a general market, namely, the middle-American buyers that Silicon Valley has traditionally underserved. The founder, former Honest Company VP David Yeom, came from a family that shopped at dollar stores in order to purchase goods in large quantities without having to worry too much about the price, a behavior that is prevalent in middle America. According to Yeom, the concept of a dollar store “suffers from some perception and stigma…but 80 million people shop at these places. When you talk about massive scale, that’s what this industry is all about.”

To meet this need, he started a company that focused on recreating the dollar store experience online—users scroll through the site and find items just like they would at an actual dollar store. Most of the items sell for $5 or less and no item sells for over $10. It worked to capture the general market—80% of the company’s orders come from outside of California and New York, a great example of a brand growing out of one of the largest cities in the U.S. to reach a general market. The company has grown quickly and is already creating its own private-label products based on its customers’ needs.

Sliding-scale pricing

Pricing on a sliding scale is another way to go after a general audience. The concept of giving a different price to different consumers based on their incomes is prevalent in regions like Latin America where the general population is split up into social classes that pay varying prices for heating, air, apartments, and other goods.

With such a large middle class in the United States, the practice of charging varying prices for the same good or service has been useful for some companies. In the past, amusement parks and museums have charged different prices based on different factors such as student status and retirement age. With the advantage of the Internet, it is possible to emulate this behavior in order to appeal to the public and become a company that the majority of the population can use.

Amazon Prime

For example, in response to different e-tailers reaching a cheaper and price-conscious audience, Amazon is now trying to get the general market to choose Prime. They’ve recently launched a discounted membership to shoppers on the Supplemental Nutrition Assistance Program (SNAP). With this, Amazon is luring discount shoppers online to their site and shifting their need to go to Walmart for the best prices ($1 out of every $5 from SNAP currently goes to Walmart). With 43 million Americans on the SNAP program, this could bring in millions of new members to Prime, which already boasts an estimated 80 million customers.

Diapers.com & Jet.com

Looking at mothers’ predilection and need to continuously stock up on certain diapers, entrepreneur Marc Lore started Diapers.com, which rewarded consumers for using his site to make essential baby purchases through discounts and seamless delivery options. The site became so popular that they initiated a price war with Amazon, who tried to undercut their price and created Amazon Mom, in order to take a piece of the pie.

His next company was Jet.com, which offered a 15 percent discount on its items, playing on people’s need for a discount rather than focusing on free shipping like Amazon. Even the 5 percent undercut on prices paired with an absent membership fee was enough to pull some consumers away from other companies. The site’s focus on the general market made a huge dent in the ecommerce space and became a quick competitor to Amazon, even when other companies like Walmart had been scrambling to catch up to the giant.

The companies mentioned above used a mass strategy to attract a general audience, scale up, raise millions of dollars, and ultimately become threats to other mass retailers. They’ve all fundamentally reinvented the concept of shopping for everyday consumer goods and have focused their attention on solving general pain points.

Amazon acquired Mark Lore’s first company once it started a price war, leaving Lore no choice but to sell. Walmart bought Jet for three billion dollars in cash, indicating Jet’s mass strategy paid off handsomely and led to a high valuation that brought money to its founders.

To grow, general brands go niche

Once a brand goes after a huge market, at a certain point it needs to break the market into individual segments to grow further. The shifting consumer landscape and differing consumer trends eventually necessitate a change in business strategy. Starting from general and then moving to a niche audience can be very powerful for brands that want to reach new audiences.

To realize the potential of niche audiences, general brands are adding layers to their targeting strategies by strategically thinking of people as part of different “personas,” “groups,” or “types.” Using a mix of art and science, brands seek to understand who their consumers (or potential consumer groups) are, and strategically target them by their passions, pain points, and behavioral needs.

One published example of a persona comes from Women’s Marketing, a beauty consulting company. It recently created a series of five distinct personas that reflect the female American beauty consumer. Using the nuanced information people provide through their digital media profiles, they came up with five groups: the Elemental, the Enterprising Mom, the Established Mom, the Passionista, and the Super Beauty. Each of these five personas looks at beauty in different ways and doesn’t need to necessarily align on specific shopping behavior, geography or social class. They have groups of overlapping attributes that make them fall into a certain persona. The Elemental might find herself drawn to the “the natural, woke-up-like-this look,” while the Super Beauty is “the go-to fashion expert among her friends and family” who also happens to like shopping alone. Brands can find these different personas by considering what type of information they’d like to find about consumers, competitors’ consumers, or specific people, and then analyzing information based off of this.

Hilton

As Airbnb starts taking market share from hotels, larger chains have started responding in kind by creating hotel concepts targeted to the Millennial consumer who wants different things from her hotel experience. For example, Hilton announced a new brand called “Tru by Hilton” in 2016. It centers around the premise of targeting and maintaining Millennial travelers. These hotels have a coworking vibe in the lobby and offer customizable breakfast options, wireless printing, and other amenities in exchange for smaller, more functional rooms. This might not appeal to older business travelers that want all the in-room comforts they are accustomed to, but it is a prudent way to reach adventurers and young travelers and compete with Airbnb and even hostels. According to Christopher J. Nassetta, president and CEO of Hilton Worldwide, Tru is “on the fast track to becoming our largest brand.”

CB2

Crate and Barrel launched CB2 in 2000. The store targets younger city-dwellers and features smaller items that fit in seamlessly with apartment living. The store is a minimalist and modern version of Crate and Barrel. Think airy Williamsburg loft vs. a classic Upper East Side apartment. CB2 started in Chicago and, since then, has moved into other urban areas like New York. It also features cheaper prices and funky styles, which helped refresh the company and brought new consumers into the mix.

Instead of making the general brand larger by using the same strategies and audiences as before, CB2 and even West Elm, a subsidiary to the more traditional Williams Sonoma, thought through their unique selling proposition to ensure that they continue to evolve as time passes, tastes change, and the dominant consumer also evolves. General brands that want to keep growing likely need to employ the same strategy.

Sephora x JCPenney

Legacy brands can also partner with smaller or more niche players in order to refresh their brands and join in on a niche space. Using strategic partnerships to attract niche shoppers can be a powerful strategy for large players who don’t want to change their whole business model or create their own new brands. For example, JCPenney brought Millennials into its stores by partnering with Sephora in its more upscale locations, which it has been doing for the last ten years. The company is now expanding its Sephora store-within-a-store concept to even more locations, which has increased the number of young shoppers. JCPenney stores with Sephora’s in them average more sales per square foot than those without them (over three times more at $500-$600 per square foot).

By focusing first on the mass market and increasingly targeting niche audiences, brands can add new layers and fresh thinking that ultimately reaches and engages more potential buyers than a general brand could have reached or captured on its own.

Wrap Up

Starting with general markets and then growing through niche strategies has its upsides. It’s possible to start by focusing on the commonalities of a large portion of the population. To keep scaling, brands eventually need to go after more specific niches by targeting specific behaviors. The ability to move between thinking broadly and specifically will only increase a brand’s value.

Part II will focus on starting with a niche strategy and eventually scaling it with general audiences.

The Cut Ticket

The Cut Ticket provides tactical questions that help you take action.

Brands

  1. If your brand targets a general audience, have you saturated the market for your products?
  2. What niche audiences are logical evolutions for you to drive growth?
  3. Are you able to reach these new niche audiences with your same product assortment, or do you need to develop new ones?
  4. What audiences could you go after that your company is uniquely poised to compete for?
  5. Do these new audiences require you to master new acquisition channels or use your existing expertise?
  6. Will these new audiences continue growing over time or are they flat or shrinking?

Financial Investors

  1. Why did the company start with the audience that it did?
  2. Does the team have domain expertise in the space and/or are they the target customer?
  3. Will this audience continue growing over time and can the company continue reaching this audience as it scales?
  4. How will the unit economics scale as the company grows? What ensures they won’t turn negative or become wildly less profitable?
  5. Is the company only going after consumers that are “like them,” or are they thinking through which other audiences they can target?
  6. Is the company using sustainable sales channels? Are there macro concerns that costs will continue rising?
  7. How capital intensive will it be to scale this business to a general audience and then to various niches?