Describe the ideal stock investor. Affluent? Older? Wall Street Times Subscriber? Most investment firms believe these traits represent the perfect client and they design their services accordingly. Firms offer endless advice and limitless options for the experienced investor and personally managed services for the affluent one. Flexibility and service breadth attract these customers and for the firms, fewer clients require less overhead. But who serves the investor at the other end of the spectrum? What does the inexperienced, not-yet-affluent, younger one use?
Acorns discovered that it could appeal to nontraditional investors by helping clients save when they spend. Acorns offers a mobile app that rounds up pennies from each purchase and places them no more than a handful of mutual funds. The service is designed for the young investor with less experience and discretionary cash than the industry’s ideal. Acorns built a successful business around customers the rest of the financial industry ignored.
Eone manufactures the Bradley watch for the blind and visually impaired but sells 95% of them to sighted customers. Most watches for the blind use frail hands or announce the time audibly. Eone created one that conveys the time by feel but is sturdier than alternatives. For the blind, the Bradley uses raised numbers and rotating metal studs rather than flimsy hands. For the sighted, it is stylish with a minimalistic face and attractive metal studs. For both, it tells time covertly and offers a unique backstory. The wearer merely touches the watch without dropping his gaze or signaling her disinterest during a personal exchange. It also makes no distinction between the sighted and visually impaired customer; it provides value to both. Eone built a watch for the visually impaired but sells 19 times more watches because it incorporated features from products for the sighted.
Both of these companies and others like them build unique products that appeal to a segment that traditional rivals ignore. When other furniture retailers sought older high-end buyers, Ikea targeted those at the price-conscious who furnished dorm rooms and first apartments. When traditional news outlets spoke to older viewers, the Daily Show merged politics and humor to reach a younger audience. When taxis took younger riders for granted, Uber built a service around their lifestyle. It required no cash, reduced the risk of theft, and provided the convenience of a mobile app. Nearly 60% of its ridership is under 35.
Each of these examples incorporated attributes from outside of its industry.
New customer segments hide within other industries. Discover what potential customers love about other markets and determine if it can be incorporated into yours.
- What customer segment does not purchase goods from traditional companies in the industry? Are they older, younger, parents, women, men, urbanites, etc?
- Which industries attract this group?
- What traits or capabilities appeal to them?
- Which of these traits could be profitably incorporated into your offering?
The fifth question may be the most difficult. Successful entrepreneurs must examine the roots of customer preferences. For instance, it’s easy to assume that Acorns and Uber attracted younger customers through technology but comprehensive examinations yield more. Acorns clients did not want to save thousands before investing or navigate financial management’s stifling complexity. Uber diminished the fear of theft by removing the need for riders to carry cash or credit. It made travel more deterministic with expected arrival times and maps. It made rides safer by allowing friends to track their progress. Examining customer behavior in other industries showed both companies how to create value in their own.
There are reasons why some businesses don’t appeal to every potential customer. They often build services around a specific group and neglect others. The key to finding those neglected customers is to identify what they prefer in other markets. Ignored customers will become new ones – when you offer what they value elsewhere.