The Very Rad Consumer
11.07.17
Blog, Community, News, Thoughts
By Anna WhitemanMany people have been asking me lately what makes one tech-enabled consumer company distinguishable, i.e. investable, from another. My answer? Whether you’re speaking of consumer in the context of marketplaces/ecommerce, mobile, devices or products, my preference is to see a brand that is, in short, very rad. Let’s break this down:
V – vertically integrated model
- Simplifies supply chain dynamics for more efficient production
- Allows brand to retain control/ownership of manufacturing processes and IP
- Turns executives into operators who intimately know each angle of their business
E – Evangelist early adopters
- Consumers willing to defend brand/product passionately
- Provides free and organic word-of-mouth marketing
- Gives strong foundation to weather inevitable bumps in the road
R – Removes friction in consumer journey
- Provides simple, seamless transaction experience that leaves consumer feeling fulfilled rather than cheated, frustrated, or tricked
Y – Younger consumer age group
- This one is a bit of a stretch (Y is a hard letter!) but with a booming millennial generation that has grown up transacting through PayPal and Venmo on their smartphones, market opportunity is vast in this consumer segment
- With millennials earning 20% less than boomers did during the same stage of life, consumers in this age group are voting with their wallets; traction with this consumer correlates with strong brand affinity
R – Repeatable consumer usage patterns
- Asset heavy consumer is a tricky business because purchases tend to be fewer and more far between (Peloton is a great example of a company bucking this assumption)
- High velocity usage patterns smooth out supply/demand dynamics which translates to a more predictable cash flow model; cash flow = reinvestment
A – Automates the routine and tedious
- Routine and tedious are easy-to-solve problems – note-taking automation is one field in which there have been some great machine learning advances (with a simple backend, repeatable usage patterns, and younger consumers, to boot)
D – Data driven
- Data is king – I love to see brands that can inherently collect user preference data to provide an even better user experience with each iteration of use
- Data collection also provides a brand with stickiness leverage – consumers are less likely to abandon brands that have gotten to know them over time
I will say up front that none of these are a hard and fast mandate for a tech-enabled consumer brand to be successful and some characteristics carry more weight than others depending on the subsector of consumer-tech that you’re dealing with. Qualifications aside, these characteristics have been pretty consistent in the more successful breakout brands that we’ve seen in the ecosystem in the last few years. I challenge readers to run a few brands that they might think of investing in through this litmus test – how do they stack up? What matters to you?
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