Executive Summary

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 architect 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 among a large population, giving a brand the opportunity to scale. Mass sensibilities shift as new trends, technologies, and consumer expectations take shape. In this sense, mature brands that have focused on general audiences must shift their strategies to reach this changing audience if they don’t want to become tired or irrelevant. Additionally, they can dive into new niches by creating sister brands or niche products, which can lead to new revenue streams while enlivening parent brands.

This report looks at:

  • What’s happening with mass-market audiences and why does it matter for the larger consumer ecosystem?
  • What do these successes and failures mean for brands, investors and real estate developers?
  • What should brands, investors and real estate developers do to harness the powers of mass-market audiences?

Takeaway

  • Building for a general audience often requires companies to look beyond the coastal cities they are most familiar with, providing extra value, and thinking through pricing architecture. 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

The Market: What’s happening and why does it matter?

Building for the 99%

In the US specifically, the biggest audiences are far from the coastal cities founders and VC’s tend to be from. Some call this building for the 99%, not the 1%.

Online dollar store Hollar started off by capturing a general market, namely, the Middle American buyers that its founder felt were underserved by Silicon Valley. The founder, former Honest Company VP David Yeom, came from a family that shopped at dollar stores in order to purchase a large number goods without worrying 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 would have the ability to scroll through a page and find items as they would at an actual dollar store. Most of the products cost $5 or less and no item is over $10. Hollar says that 80% of its orders come from outside of California and New York, a great example of a brand moving outside of the largest cities in the U.S. to capture 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 consumers based on their incomes is prevalent in regions like Latin America where the general population is split up into different social classes that pay various prices for heating, air, apartments, and other goods.

With such a large middle class in the United States, the practice of charging various prices for the same good or service has been useful for companies such as amusement parks and museums. These organizations charge different prices based on different factors such as student-status and retirement age. With the internet, it is possible to emulate this behavior in order to appeal to the public and become a company that can be used by the majority of the population.

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, since the membership is mostly popular with wealthy households. The company recently launched a discounted membership to those shoppers who are on the Supplemental Nutrition Assistance Program (SNAP). 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 boast an estimated 80 million subscribers.

Providing Extra Value

Looking at people’s predilection and need to continuously stock up on certain essentials like diapers, personal care items, and pet food, entrepreneur Marc Lore started Soap, Wag, and Diapers.com, which rewarded consumers for using his site to make these purchases through discounts and seamless delivery options.

His next company was Jet.com which offered a fifteen percent discount on its items, playing on people’s need for a discount rather than focusing on free shipping like Amazon. Even the 5% undercut on prices paired with an absent membership fee was enough to pull some consumers away from other companies and shop on the site. 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 market strategy to attract a general audience, scale up, raise millions of dollars, and ultimately become threats to other mass retailers. They have all fundamentally reinvented the concept of shopping for everyday consumer goods and have focused their attention on solving general pain points.

Mark Lore’s first company was acquired once by Amazon once it started a price war with the company, leaving Lore no choice but to sell. For Jet, the company was bought by Walmart 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.

Cutting up consumers into personas

As a brand goes after a huge market, it needs to break it into individual segments to grow further. This is necessary as the shifting consumer landscape and differing consumer trends call for a change in business strategy. Starting with a general audience and then targeting niche audiences can be very powerful for legacy brands that want to reach new audiences.

To realize the potential of niche audiences, mass market brands are adding layers to their targeting strategies by strategically thinking of people as part of different “personas”, “groups” or “types”. With a mix of art and science, there is an opportunity to understand who each of the consumers or potential consumer groups are and strategically target them by their passions, pain points, and behavioral needs.

A published example of persona segmentation comes from beauty consultant company Women’s Marketing who 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, the company came up with five groups: the elemental, the enterprising mom, the established mom, the passionista, and the super beauty. Each of these five persona’s might look at beauty in different ways and don’t need to necessarily align on specific shopping behavior, geographies, social classes, and favorite movies but they have groups of overlapping attributes that make them fall into the same persona.

The Elemental might be influenced by 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 first thinking about their brand and what type of information they’d like to find about consumers, competitors’ consumers, or specific people and then analyzing information based off of this.

Creating sub brands that appeal to the new generation

As Airbnb starts taking market share from hotels, larger chains are 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 that was created around the premise of targeting and maintaining Millennial travellers. 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 an older business traveler that wants all the in-room comforts they are used to. But this is a prudent way to reach adventure and young travelers and compete with AirBnB or even hostels. According to Christopher J. Nassetta, president and CEO of Hilton Worldwide, Tru is “on the fast track to becoming our largest brand.”

Crate and Barrel launched CB2 in 2000, as an alternative to Crate and Barrel, a store for younger city-dwellers that featured smaller items that fit in seamlessly with apartment living. The store is meant to be 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 featured cheaper prices and funky styles which helped to refresh the company and bring new consumers into the mix.

Instead of making the general brand larger using the same strategies and target audiences they’d used 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.

Bringing in foot traffic through partnerships with other brands

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 than three times more at $500-$600).

All of the aforementioned techniques add new layers and fresh thinking to general brands and result in strategies that reach more and increasingly engaged people that the general brand couldn’t have reached or captured on its own.

What do general audiences mean for you and what should you do to take advantage of them?

Brands

When brands create a product or service intended for a general audience, there are a few key areas to pay attention to:

Appealing to both niche and mass

We now live in a world of very diverse populations with a range of needs. The days overarching brands resonating with everyone are numbered. The brands succeeding appeal to both niche and mass audiences at the same time.

  • How should you pivot your general brand message in order to go after new niches?
  • Will you cannibalize your brand by going after niche audiences? How can you go after them without diluting your main brand name?
  • How can you play with your price architecture or offer tiered pricing depending on different consumer needs?

Enlivening mature brands through partnerships

Older, more mature brands can fail to excite younger consumers who see them as brands for their parents and grandparents. Enlivening the stores through partnerships and exploring new spin offs like Tru by Hilton may create new opportunities for revenue while freshening up the parent brand.

  • How can you focus on finding new, niche shoppers to reach if you are nearing saturation in the existing markets for your products? Which audiences are logical evolutions for you to drive growth?
  • Which new acquisition channels will you need to master in order to reach these new audiences? Are there new skillsets to learn or can you leverage existing ones? How can you fool-proof these new audiences and make sure they’ll continue growing rather than remain flat or shrink?
  • How can you position your existing product assortments to reach these niches or develop new products that better speak to them?

Starting new brands aimed at a general audience

When starting a new brand by focusing on mass audiences, you will attract the largest audience when you provide value that consumers can’t get anywhere else or solve a problem that many consumers have.

  • How is the problem you’re solving pertinent to the mass consumer?
  • What are your competitors doing in the space you’re going into as a mass brand? What additional value can you provide and how?

Scaling from mass to niche

Scaling from mass to new niche audiences presents new acquisition, profitability, and market challenges that mature brands may not be accustomed to.

  • What are the options to scale through inorganic growth? Are acquisitions, third party partnerships or daughter companies strategically viable?
  • How can the push towards niche audiences drive substantially higher profitability or become a marketing driver to revitalize the original audience? How do the incremental niche earnings reinvest in the business?

Investors

Investors need to be adept at evaluating newer mass market brands and the opportunities these companies have to differentiate themselves at scale. Similar strategies can also revitalize mature companies in your portfolio by exploring mass-to-niche strategies or partnership opportunities.

How scaling shifts brand strategy

When evaluating opportunities, the potential scale and opportunity for new general brands is massive especially if the brand is prudently competing with other giants and adding an important component these brands are missing. It is important to think through the ongoing strategy to reach the audience and become sensitive to their sensibilities.

  • How can you ensure that the company’s strategy aligns with the audience it started with and will continue growing with?
  • How will this audience continue growing over time and can the company continue profitably reaching this audience as it scales? How will the unit economics scale as the company grows? What ensures they won’t turn negative or become wildly less profitable?

Competitive advantages and efficiencies

For a mass brand to succeed it should have a competitive advantage, technology, or efficiency that will allow it to profitability enter the marketplace, find a willing audience and scale.

  • Will it be capital intensive to scale this business to a general audience and then to various niches? How do you know if the company is using sustainable sales channels? Are there macro concerns that costs will continue rising?
  • How does this idea provide marginal value to consumers? Is it providing shoppers with a service, discount, product, or experience they can’t easily find somewhere else?

Building for the 99%

It is important to invest in companies that are built for the 99%, not the 1%. Understanding middle-America and the non-coastal population is crucial when targeting mass audiences.True mass market brands succeed not in the coastal cities but in the less known pockets of states and countries.

  • How do different KPI’s and metrics differ in each city the company is selling in? Is it only successful in certain cities or areas and can this change?
  • Do you know if the team has domain expertise in the space and/or are they the target customer? How should this impact your decision in investing?

Real Estate Developers

Real estate developers need to understand the aesthetics and mentality of modern mass market brands, in addition to the survival tactics general brands are using to stay relevant. Developers should be innovating in parallel to the companies they serve. As shopping behaviors change and companies supplant incumbents, real estate developers need to keep up with the pace and ensure their properties remain relevant, occupied and in tune with the times.

Borrowing strategies from specialized malls

Although some malls are meant for general audiences, specialized malls are thriving today. it is important to think through the different persona’s of people that are coming into your specific properties and how your strategies around store assortment, advertising, experiences, and special events strategically targets potential shoppers.

  • When determining whether to accept a new brand into your properties, ask who is buying the products? Are they from a diverse set of locations or are most purchases coming from a specific geographic area? How can you leverage your properties to reach a larger diversity of people?
  • What geographies is the brand strong in online? How can you take this data to make your stores more profitable?

Shifting strategies based on consumer trends

The mass consumer is changing. Consumers now crave experiences and novelty, are used to quick and cheap shipping, and are open to buying from private labels. These trends should be mirrored in shopping experiences and malls.

  • What do new, mass brands say about the general consumer and shopper? How can you create synergies between the new stores and your properties?
  • Which services can you provide for tenants in order to help them navigate these new changes? Do stores need to stay in the same sizes and shapes they are in today? How should the context of shopping play into these shits?

Facilitating brand partnerships

Help your large, tired stores create strategic partnerships or synergies with smaller direct to consumer companies that are popular among younger people. Although it’s difficult to replace anchor stores with smaller brands, they can strategically increase the foot traffic into them similar to how JCPenney has done with Sephora.

  • How can you help large, mass brands more easily create and house niche brands in your properties? How can you structure your deals around these new brands in order to maximize foot traffic and relevance among your properties?
  • How could you help your existing tenants find and work with these smaller brands, many of which are looking for legitimate distribution?

Going Forward

General audiences are fundamentally shifting each year as shoppers demand better and more personalized products and services. Customers can buy products from an increasing number of niche companies, who often provide added value and a better customer experience than mature brands do. This creates a need for mass brands to rethink their business models and in some cases expand their brands and target different niches.

Mature brands like Hilton and Crate and Barrel are already responding and have made successful sub-brands to engage this new audiences, while venture-backed consumer startups are introducing fresh concepts, products, and better value that consumers have come to expect. These shifting consumer expectations threaten the business models and viability of many existing mass-market brands. Brands of all types need to think strategically about how to evolve and change their product assortments, sub brands, marketing, and real estate investments to take advantage of this changing consumer landscape.